Preston's office market A-game

Plans for a £100m office scheme could put the city back on the map - if an occupier bites.

Agents are often prone to sweeping statements when it comes to extolling the virtues of the developments they have been appointed to let - so when Roger Parker of Parker & Company described Preston City Council’s plans for a £100m office scheme on the city’s ring road as a “game-changer” at its launch in May, it might have fallen on deaf ears.

But given that the city currently has no grade-A office space whatsoever, the scheme, Altus, really does have the potential to change the game and not just in terms of office occupiers attracted to the city. With the high-profile occupiers it is likely to bring in, it could also have a positive knock-on effect on the residential and leisure markets.

At the moment, however, the operative word is ‘could’. For the scheme to be developed, the council and the private landowner that jointly own the site must first secure a pre-let on at least part of the 343,737 sq ft space - which could be harder than it looks.

“The issue in Preston is that we have got a lot of 1960s office accommodation that is no longer fit for purpose,” says Chris Hayward, director of development at Preston City Council. “There is a real shortage of grade-A accommodation in the town centre and getting that brought forward really needs somebody to take a leap of faith.”

Many large developments in Lancashire are supported by public sector occupancy, such as Blackburn’s Cathedral Quarter, where the council entered into a joint venture with Capita to develop a mixed-use scheme incorporating the city’s first grade-A offices, which it then partly occupied.

Ross Shine, head of real estate at the Preston office of law firm Brabners, believes that, with occupier costs around two-thirds that of Manchester, Preston could also attract the public sector. “There are a number of government contracts set to expire in the next few years, so those departments will be looking to relocate,” he says.

That is not to say private sector firms aren’t a target. Preston’s out-of-town office market, towards the M6, has seen significant growth as a location for private companies, a trend that could potentially migrate to the city centre.

Northshoring trend

Preston could also prove a draw to occupiers from London and the South East looking to move into northern offices to cut costs. Indeed, if it improved the quality of its office stock, Preston could ride a potential ‘second wave’ of northshorers relocating from the south, something that, to date, it has struggled to do.

The city’s current lack of high-quality stock has hamstrung ability to capitalise on any overspill from the hotter office markets of Manchester and Liverpool

“The city’s current lack of high-quality stock has hamstrung its ability to capitalise on any overspill from the hotter office markets of Manchester and Liverpool,” says Richard Wharton, office agency director at JLL.

“For the right kind of occupier, the belated arrival of grade-A stock in Preston will make it an attractive alternative to the main commercial hubs in the North West.”

However, Shine adds that it is a chicken-and-egg scenario and that without grade-A buildings being at least under way in the city, companies are likely to continue to overlook Preston. “If we are really going to compete with Manchester and Liverpool, something of [Altus’s] ilk needs to be there for firms that are looking to relocate,” he says.

The Altus site - which houses a retail warehouse and car park - has been the subject of various planning permissions for hotel and office schemes over the years. The council’s decision to focus on bringing forward the Altus scheme was inspired by a new City Living Strategy, which it worked on with Cushman & Wakefield and aims to attract inward investment and breathe new life into the centre.

The strategy was focused on the residential sector, but for Hayward that was always just part of the equation. “A vibrant office market means a strong workforce and more people spending money in the local economy,” he says. “We want to see a thriving town centre with a strong resi offer, a thriving business area and more office development to get ready for when HS2 arrives.”

Cushman & Wakefield’s Caroline Baker, who worked on the City Living Strategy, says the city’s young professionals are currently underserved in terms of accommodation. “Anecdotal evidence suggests that young professionals are having to rent in other areas such as Blackpool in order to access quality accommodation in a vibrant centre,” she says.

That could change quickly: the Altus building has the potential to house 3,000 staff, all of whom will need accommodation. “Clearly Preston is not Manchester, Liverpool or London, but it has green spaces that are better than central Manchester’s, schools within the city centre and the potential for a range of housing options,” says Baker.

In short, Altus could be a game-changer - but only if an occupier is willing to play in the first place.

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