Advance

UK Office Market Research

September 2014

The new geography

of office demand
2: Business Parks –
rising to the challenge
2 | Advance • The new geography of office demand: Business Parks – September 2014
Executive summary
The Urban Tendency presents a challenge for business parks.
Changes in the way we live and work are driving rapid growth in
city centres. This can be expected to work against the expansion of
business parks and we may see the level of stock fall over the medium
to long term.
Despite these long-term trends, occupier demand for business
parks has held up well. Business parks remain attractive to many
occupiers, and city centres do not suit all occupiers, such as car borne
sales organisations. They offer large, flexible floor plates, lower average
occupancy costs and also provide much needed space where there is
limited scope to expand city centres. Recent trends in take-up support
this view. Occupier demand is stronger than many perceive it to be and
there is no evidence of a secular decline in demand for parks.
While office park performance has lagged that of standard offices,
this has reflected the ‘London effect’ rather than broad-based
weakness of parks. Office parks have offered strong income returns,
but weak investor sentiment has seen yields drift outward in recent
years and this has resulted in falling capital values. However, the
underperformance relative to standard offices has been largely due
to the strong performance of the London market, with office parks
performing broadly in line with the regional office market.
The drivers of occupier demand continue to evolve with clustering,
place-making and productivity rising in importance. These drivers of
demand present challenges and opportunities for business parks, and they
will require adaptation to ensure continued attractiveness to occupiers.
We identify seven drivers that will help ensure success for
business parks in the future. Successful business parks of the
future will be those that: have a coherent master plan with a strategic
approach to managing sustainability risks; have the scale to provide a
viable and diverse offer; complement nearby city centres; have strong
transport links or adequate car parking; have high build quality and
provide broader amenity and an attractive surrounding environment.
The aggregate performance of business parks will improve,
and we expect they will out perform standard offices in the future,
but a two-tier market will become increasingly apparent.
With solid income returns and low capital values, our outlook is for
a much-improved performance from office parks over the next five
years. Higher yields provide an opportunity for investors to buy into a
recovering market, at a discount to city centre stock. However, there
will be divergence in performance, with parks that offer the requisite
mix to attract occupiers clearly out-performing those that fail to adapt to
an evolving market.
Look for a stronger performance from fringe business parks than
out-of-town parks. Market trends will work in favour of business parks
on the urban fringe relative to those out-of-town. Fringe parks tend
to be better connected, and proximity to city centres means it is less
important to provide a broad amenity offer on site. Out-of-town parks
will need to work harder to attract staff and provide the environment
occupiers are looking for.
Advance • The new geography of office demand: Business Parks – September 2014 | 3
Introduction

Welcome to the second of three reports looking at the changing geography of office demand.
The first report1 in the series, The Urban Tendency, looked at the growing appeal of city
centres. This is being brought about by significant changes in the way we live and work,
driven in no small part by the twin forces of technology and globalisation. This will lead to
strong growth in our major urban centres, and in turn bolster office demand.

This report describes these challenges for business parks in this
environment. The business park model is not dead, but certainly faces
challenges from the negative implications of trends in demographics
and occupier preference. Of course, business parks remain attractive
for many occupiers. City centre environments will not suit every
business, and parks offer secure, managed, efficient space. We
believe that there will continue to be many successful parks, even if the
overall stock declines.
We begin by describing the different types of business park, as the
sector has evolved in recent years. Recent trends in office market
performance are assessed, comparing the performance of parks
relative to standard offices. We then provide an analysis of the shifting
patterns in office demand, building on the analysis provided in The
Urban Tendency. Key attributes that will drive success for business
parks in this challenging landscape are then identified, and the report
concludes with some comments on the market outlook.

To succeed, however, business parks will need to ensure they meet

the needs of today’s occupiers by providing a productive and attractive
work environment. This report describes this challenge and the factors
that will drive successful parks in the future. 1
The Urban Tendency, JLL, 2013

Winnersh Triangle, Winnersh Edinburgh Park, Edinburgh White Rose Office Park, Leeds

4 | Advance • The new geography of office demand: Business Parks – September 2014
Terminology
The term ‘business park’ is referred to frequently
throughout this report, reflecting the fact that
business parks typically have a mix of commercial
uses, alongside some standalone office parks.
However, the focus of this report is on the office
element of business parks and the drivers for office
demand. An exception to this is our analysis of IPD
data, where we refer to the ‘Office Parks’ segment
(further definition of this is provided in the business
park performance section).

Advance • The new geography of office demand: Business Parks – September 2014 | 5
Defining business parks

Traditionally, business parks have been located outside of major urban centres. As such, previous
research has generally looked at the performance of city centre locations relative to out-of-town,
before drawing conclusions about the weak performance of business parks. However, business
parks can increasingly be found in suburban or even urban fringe environments.

In this report we attempt to look beyond the traditional city centre
versus out-of-town comparison to focus on the attributes and performance
of parks themselves, as distinct from their location. Our analysis therefore
relates to both out-of-town and fringe business parks. There are
similarities but also important differences between the two.
Out-of-town
For out-of-town business parks, there is a clear geographical
distinction between the urban conurbation and the business park
location. Out-of-town parks typically have good road connections,
a managed and landscaped environment, and can offer occupiers
secure, well-specified buildings in areas to which their workforce can
drive in comfort.
However, not all business parks are located out-of-town. Found at the
edge of a town or city, the fringe business park is where town meets
country. In many respects, fringe business parks offer occupiers the
benefits of both in town and out-of-town locations. Fringe locations
can offer the amenities of the city centre without the expense of CBD
locations and offer a more flexible workspace.
Successful fringe business parks are typically better connected to
public transport as the emphasis on car borne transportation is less
important. Given their proximity to nearby urban centres it is also less
critical for extensive amenities to be provided on site.

Successful out-of-town business parks are typically located in areas of

economic vibrancy with a strong and established business community.
For developers, they offer a chance to build to an impressive scale with
cheaper building costs and land values, to mix pre-let and speculative
risk together with site flexibility which enables, for instance, active
and passive sustainability measures such as on site renewable power
generation, or flexibility with building orientation. Investors get the
benefit of all the above with added opportunities to manage the local
public realm and amenity base, to recycle buildings within the same
park and to work with occupiers across the portfolio to ensure flexibility
and an adequate length of income.

Fringe
As described later in this report, business parks have experienced
value depreciation and investor sentiment has been weak in recent
years. Much of this negativity comes from the preference from
businesses and their employees to be located in-town, where they are
supported by closer proximity to residential stock and public transport. Edinburgh Park, Edinburgh

6 | Advance • The new geography of office demand: Business Parks – September 2014
Business park performance

The aggregate investment return performance To some extent, the fall in values illustrates the challenges faced by
office parks given the wider context of the urban tendency. However,
of office parks has lagged that of standard the decline in values following the financial crisis has not been restricted
offices, however this reflects the generalised to the office park segment, with standard offices in the rest of UK also
weakness of the regional office market in seeing declines of the same magnitude. As such, the performance
largely reflects the difficulties of the regional market as a whole, rather
recent years as opposed to specific weakness than of office parks in particular.
of parks. Occupier demand has held up Figure 1: Average office total returns by region and type
relatively well and elevated yields relative to 16%

other office product means that business parks 14% Average return 2001-13

are attractively priced for investors. 12% Average return 2010-13

10%

Underperformance relative to the in town market, but largely 8%

due to the London effect 6%

IPD data reports the average total return in the office parks segment 4%
from 2001-13 as 3.4%, compared to 6.8% for standard offices2. This
2%
difference has been more pronounced in recent years, due to a strong
recovery from standard town centre offices. 0%
Standard Office Std Office: Central Std Office: Office Park: Office Park:
Offices Parks & Inner London Rest of UK London & Sth East Rest of UK

However, this picture is heavily influenced by the strength of the Central Source: IPD

London office market, which is boosting aggregate standard office

Figure 2: Capital value index
performance. Central London offices have performed very strongly in Index, Dec 2000 = 100
recent years, averaging a total return of 14.9% since 2010. The 160

performance of standard offices in the rest of the UK has been more

closely aligned with that of office parks. Standard office returns have still 140

edged office park returns over the full period since 2001, but more recently 120

office parks have actually out-performed. Since 2010 office parks have
offered an average return of 4.9%, compared to rest of UK offices with 2.6%. 100

80

The subdued returns for office parks reflect the balance between solid
income returns on the one hand, but falling capital values on the other. 60

Capital values did not grow as much as for standard offices during the 40
broad-based market upswing to 2007, and have fallen since. Capital Dec
00
Dec
01
Dec
02
Dec
03
Dec
04
Dec
05
Dec
06
Dec
07
Dec
08
Dec
09
Dec
10
Dec
11
Dec
12
Dec
13

values of rest of UK office parks now stand around 38% below their 2001 Standard Office: Central & Inner London Std Office: Rest of UK

level, with values in London and the South East down by 33%. Office Park: London & South East Office Park: Rest of UK

Source: IPD

2
IPD define Offices Parks as: Post-1980, low rise office buildings on campus-style developments, with over 75% office content, significant car-parking provision and good transport links. The latest IPD UK
Annual Digest tracks 269 office parks in the UK with a combined capital value of £3.6 billion as at December 2013.

Advance • The new geography of office demand: Business Parks – September 2014 | 7
Elevated yields present an opportunity
The fall in capital values has been driven by outward yield shift.
Investors have been very cautious in their attitude toward secondary
and tertiary offices across all regions, as illustrated by rising yields
across all IPD categories outside of Central London. Yields tightened
in the immediate aftermath of the downturn in 2007-08, but from 2010
until mid-2013 a lack of confidence in the outlook for occupier demand
saw yields edge upward.
Since then, however, the economic recovery has gathered momentum
and yields have begun to fall. We see evidence of this in both the IPD
series and our JLL prime yields, which both point to strengthening
investor demand for offices in the regions and across office parks. The
prime yield data also illustrates that while sentiment has been weak for
office parks in aggregate, demand for best in class assets has held firm
in recent years.
While rising yields have impacted returns negatively in the past, for the
prospective investor they offer strong income returns and the potential for
capital value growth driven by an unwinding of the outward yield shift.
Despite their lagging capital value performance, office parks have
actually out-performed in terms of income return, and this strong
performance looks set to continue. Alongside improved capital value
growth prospects, it is likely that office parks will provide much stronger
total returns in coming years. This presents an opportunity for investors
to buy into a recovering market, and take advantage of mispricing of
better quality parks which have been impacted by weak sentiment
toward the sector as a whole.

Figure 3: Equivalent yields

11%

10% Figure 4: Income returns

9% 8%

7%
8% 6%

5%
7%
4%

6% 3%

2%
5%
1%

0%
4%
Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Standard Office Std Office: Central Std. Office: Office Park: Office Park:
01 02 03 04 05 06 07 08 09 10 11 12 13 Offices Parks & Inner London Rest of UK London & Sth East Rest of UK

Standard Office: Central & Inner London Std Office: Rest of UK Average return 2001-13 Average return 2010-13

Office Park: London & South East Office Park: Rest of UK

Source: IPD
Prime office parks

Source: IPD, JLL

8 | Advance • The new geography of office demand: Business Parks – September 2014
 Weakness in investor sentiment not justified by pattern of take-up
Recent trends in take-up support this view. Interestingly, despite the
long-term trend to greater urbanisation, we have not seen this result in
a material decline in out-of-town office take up. The out-of-town share
has averaged 37% across the Big 6 markets and 56% in the Western
Corridor from 2003-13, and while it has shown considerable volatility in
the Western Corridor, there is no evidence of secular decline.
While take-up in 2014 has been subdued, 2013 saw considerable
strength in out of town demand in the Western Corridor, with take-up
reaching 1.3 million sq ft, the highest level across the period. This goes
to show that occupier demand is more resilient than many perceive it
to be; in spite of urbanisation, many continue to look to office parks to
satisfy their space requirements.

Figure 5: Comparing city centre and out-of-town take-up (units over 10,000 sq ft)

3,000 84%

Big 6 Western Corridor

2,500 70%

2,000 56%
Thousands sq ft

1,500 42%

1,000 28%

500 14%

0 0%
2004 2006 2008 2010 2012 2014 2004 2006 2008 2010 2012 2014

City centre Out-of-town Out-of-town share (RHS)

Source: JLL

Advance • The new geography of office demand: Business Parks – September 2014 | 9
Shifting patterns of office demand

The Urban Tendency noted that increasing

“Some out of town locations, particularly in
numbers of businesses wish to locate in or ….towns with constrained cores, are likely to
close to city centres, and that this would benefit just as much as city centres from the
intensify over the coming decade. Changes in shifts identified…”
demographics, staff preferences and working The Urban Tendency
practices are reinforcing the appeal of city There are exceptions to the rule with markets such as Cambridge
centre locations for UK businesses. These and Exeter having little opportunity to develop in the town/city
trends will impact business parks and without centre so there has been no alternative to business parks. In such
centres business parks rents typically exceed town centres.
doubt present a challenge, however, they are
by no means insurmountable.

Clustering of people and businesses – a key driver of location
decisions
A number of recent studies demonstrate how occupier preferences are
becoming more strongly biased towards city centres. This is being driven
by the ability to recruit and retain staff, alongside demographic and
economic forces, including the benefits of clustering and agglomeration.
whether located out-of-town or on the fringe. Where there is a strong
economic story, such as in Cambridge, the traditional debate around
whether to locate in town or out-of-town is much less relevant for occupiers.
The rise of cycling in England & Wales

On the surface, therefore, it would appear that demand for traditional

out-of-town business parks could be at risk. This trend is not only
evident in the UK. In California major occupiers with an eye on talent 2001 650,000
retention have grown their businesses into San Francisco’s South of
Market district (SOMA) in an effort to attract and maintain a young
talented workforce. SOMA has become more popular over the last
decade – in particular for younger employees for whom access to the
transit system is increasingly important. 2011 760,000
However, clustering can also occur on business parks. Indeed, many
business parks have established strong clusters associated with a
particular industry or range of activities, and these will continue to thrive.
Arguably, clusters are more obvious on business parks, and in particular
science parks, where the concentration of uses can be more focussed. 17% Numbers cycling to work up 17%
Despite a trend towards centralising, there will continue to be companies Source: ONS, 2011 Census
and entire sectors that prefer the flexibility offered by business parks,

10 | Advance • The new geography of office demand: Business Parks – September 2014
Winnersh Triangle, Winnersh

Increasingly flexible working practices colleagues and exchange ideas rather than a 9-5 workspace, business
Flexible working practices are becoming the norm for many employers parks with good accessibility may benefit as ‘touchdown’ points.
and employees. This will not lead to the death of the office but a new and
evolving relationship between the office and its workforce. As employers Harder working, and more sustainable places
seek to improve productivity and maximise staff retention, employees Related to this, occupiers are increasingly focussed on boosting
are increasingly working flexibly, through hot-desking, utilising break out corporate productivity, including through their usage of office space.
areas and working from home or in public shared spaces. The cost of human capital accounts for a substantial share of a
company’s total costs, and therefore even modest improvements
Despite this, an attractive HQ and office environment remains vital to staff health and productivity can have a dramatic impact on
in attracting and retaining staff, and our research indicates that more organisational profitability.
needs to be done in many workplaces to achieve this. According to the
JLL Global Corporate Real Estate Survey, 67% of respondents said According to the JLL Global Corporate Real Estate Survey, 68%
that the quality of their workplace has improved during the last three of respondents reported that they were tasked with enhancing
years, with 68% suggesting that space utilisation has also increased. the productivity of the existing workplace. The priority is providing
an environment which can accommodate a range of work styles,
Business parks can compete with regard to these attributes. The enhances productivity by facilitating communication and collaboration,
larger floorplates typically available provide greater flexibility for office and promotes the well-being of employees. This includes enhancing
utilisation, such as through the creation of break out areas. Alongside the workplace’s green credentials. Studies have found up to 11%
this, lower property and operating costs more easily enable investment gains in productivity from improved ventilation and up to 23% gains in
in promoting and improving working practices. In addition, as people productivity from improved lighting design3.
work more flexibly and the office becomes an environment to meet
Aspects of this interlinked productivity and sustainability agenda could
Figure 6: the extent of workplace transformation potentially work in favour of business parks. The larger floorplates on
Question: To what extent has your global corporate workplace transformed over the last three
years/will transform over the next three years in terms of quantity, quality, utilization and density? offer allow for more collaborative and arguably more productive spaces.
Business parks also offer an excellent opportunity to build sustainably,
Base: 545 respondents
Increasing particularly where there is an opportunity to master plan the whole
80%
70%
environment and incorporate green technologies on a larger scale.
60% This encompasses energy security and providing a beneficial energy
50% mix including renewables, and is further enhanced where it involves
40%
the redevelopment of brownfield sites or the creation of a mixed use
30%
20%
sustainable community. Climate change adaptation is also easier on
10% business parks due to landscaping space and a reduced urban heat
0 island effect. Those that take advantage of the opportunity to cater to
-10%
these evolving occupier requirements will be well-placed to succeed.
-20%
-30%
-40%
Decreasing
Quantity Quality Utilization Denisty
The last three years Next three years

Source: JLL Global Corporate Real Estate Survey 3

World Green Building Council (2013) “The Business Case for Green Building”

Advance • The new geography of office demand: Business Parks – September 2014 | 11
Rising importance of place-making
Recruiting and retaining top talent is a key priority for occupiers, and all
the more so as the economy recovers and the labour market tightens.
Having the right building with the right mix of amenities and sense of
place is increasingly viewed as a means of creating a good image with
potential new hires, investors and partners. Occupiers will be looking
for locations which provide an attractive environment for staff to work,
socialise and in many cases, live (particularly on the outskirts of London
and other large cities). This will entail extensive transport linkages, an
attractive retail offer and close proximity to residential areas.
Green Park, Reading
Stockley Park, Heathrow
12 | Advance • The new geography of office demand: Business Parks – September 2014
City centres typically score highly in terms of connectivity and on the
provision of amenities. Cities have been transformed as places to both
live, work and play and allow employers to tap into the young skilled
labour which typically locate there. Despite this, city centre environments
will fail to satisfy all requirements, and some organisations will continue
to opt for business parks whether located out-of town or on the fringe.
What will set the best ones apart from the rest will be the ability to offer
the right mix of amenities and sense of place.
“The places we build around us affect
everyone, every hour of every day. They are
the ‘backdrops’ to our lives and shape the way
we think move and feel.”
(CABE)
Stockley Park, Heathrow
Drivers of Business Park success
Master plan to control environment:
1 aided by single ownership

2
Scale:
enhancing attractiveness to occupiers and accommodating diversity

Complementary offer:
3 city centres will not satisfy demand from all types of occupiers

4
Transport linkages:
accessibility to public transport and a cycle network

Supply of car parking:

5 still a critical factor for many locational decisions

Quality:
prime business parks stand out 6
Amenity:
7 competing with the town centre offer and creating sustainable communities

Advance • The new geography of office demand: Business Parks – September 2014 | 13
 Master plan to control environment
1
Business parks offer developers a chance to build to an impressive
scale with cheaper building costs and land values and to mix pre-let
and speculative risk together with site flexibility. To do this in the most
efficient manner, parks need to have a holistic ‘master plan’ to be able
to control and adapt the environment. This will likely include sacrificing
value in certain areas of the park in order to maximise the value and
attractiveness of the park as a whole.
Business parks provide far greater opportunities to master plan and
control the environment than town centre schemes which, by virtue,
are typically stand-alone. It puts the landlord ahead of the owner of a
stand-alone office building through the ability to move around tenants
and effectively control rents.
It also allows business parks to adapt to change, in particular with
amenity provision, transport infrastructure and the mix of uses
incorporated into the park design. This can include expanding
parking facilities, shuttle services to mainline transport, providing
pedestrianized zones and cycling facilities, greater landscaping or the
development of improved amenities.
The ability to master plan is aided by single ownership of parks.
Where ownership is fragmented or co-operation between owners
limited, strategic decision making can be hampered unless a collegiate
approach is adopted and, ultimately, some office parks will need to
adapt to survive. Fragmented ownership may also make it more difficult
to agree on capital expenditure.
Airport City, Manchester, is a joint venture partnership including
Manchester Airport Group, the Beijing Construction Engineering
Group and Carillion. It will be the first of a new wave of
developments in the UK benefitting from the CBD elements of a
city (eg. public transport and amenities) while also maximising the
out-of-town offerings of proximity to an airport, motorway access,
landscaping and the ability to masterplan at a macro level due
to single ownership. In the case of Airport City the 5 million sq ft
development is located adjacent to the second largest airport in
the UK so has the unique selling point of providing a gateway for
international occupiers. Airport City has been masterplanned with
physical and digital flexibility in mind with opportunities for offices,
hotels, advanced manufacturing, logistics and warehousing.
“Business parks are a long term play. To
create a place that people enjoy working at
and where companies will thrive, a successful
business park requires a long term strategy
and mind-set.”
James Dipple, Chief Executive, MEPC

Single ownership enables a co-ordinated approach to the development

of business space, with greater freedom from external constraints and
the opportunity for long term value creation. This also brings with it a
large captive tenant audience to asset manage, which will be key to
long term performance.

14 | Advance • The new geography of office demand: Business Parks – September 2014
 Scale
2
The scale of a business park is particularly relevant to out-of-town
business parks which do not have the proximity to existing amenities
and facilities that fringe business parks benefit from, such as shopping
centres, schools, housing, transport infrastructure, leisure and cultural
activities. The renaissance of town centres and the rise of city living
means that successful out-of-town business parks need to be able
to compete with the town centre offer. Economies of scale apply, and
viability of add-on amenities can only be achieved where there is a
significant footfall.
In the early stages of a park’s development the amenity offer is typically
subsidised by the landlord. Even when established, smaller parks will
subsidise amenity provision through the service and estate charge.
The sheer scale of some of the larger business parks in the UK
enables them to accommodate diversity by offering a range of business
premises, amenities, transport options and leisure and recreation. This
diversity of businesses can generate networking opportunities and
‘on-park’ cross-selling. Larger scale parks are usually underpinned
by a strong business cluster, such as life sciences at Milton Park and
nuclear at Birchwood Park.
Stockley Park, Heathrow, opened in 1986 and considers itself
to be the benchmark by which all other UK business parks are
assessed. Stockley Park occupies 150 acres and has been
developed in phases. The current built stock totals 1.8 million sq
ft accommodated in 25 buildings. The park has extensive on site
amenities and an adjoining golf course and 160 acre country park.
Milton Park, Abingdon, is one of the largest business
communities in the UK being home to 6,800 employees and over
200 organisations. The park has a built stock of 2.5 million sq
ft and has the ability to accommodate occupiers across all size
ranges for both office, industrial and science park uses. The mix
of uses (by floorspace) comprise 46% offices, 24% industrial,
23% laboratories with the remainder including other uses and
development land. The park has an additional 1 million sq ft in the
development pipeline. To give an idea of scale, Milton Park will
total 3.5 million sq ft when fully built out and will be larger than the
whole of the Cheltenham or Gloucester office markets and in line
with Exeter and York.

Cobalt Park, in Newcastle-upon-Tyne, is owned by Highbridge

Properties and is marketed as the ‘UK’s largest office park’. The
park comprises 200 acres in total with 2.1 million sq ft of built stock
and an additional 400,000 sq ft in the pipeline. The scale of this park
has helped to create a strong community with a wide range of on-
site amenities ranging from hotels to nurseries, conference facilities
to a travel office, and a country park to a health & fitness centre.

Stockley Park, Heathrow

Advance • The new geography of office demand: Business Parks – September 2014 | 15
 Complementary offer
3
In The Urban Tendency, we described the concentration of activity in A similar dynamic has been witnessed in the technology heartland
city centres. This is evidenced by research from the British Council for of Silicon Valley, California where the tech sector has experienced
Offices BCO4 which explores how demand for different types of office considerable growth and absorption of space since the beginning of 2011.
developments will change over the next decade (see figure 7). According Silicon Valley has seen a number of newer tech companies grow their
to the research, respondents generally felt that demand for business parks business into San Francisco’s South of Market (SOMA) district while more
would decrease in the future. mature companies have maintained a core presence in Silicon Valley.

Figure 7: How do you think demand for different types of office developments will Limited supply in town centres can also play a huge role in the success of
change in the next decade?
business parks. In the Western Corridor, Grade A office supply is currently
100% at its lowest level in 13 years. Across the Big Six office markets we are also
90%
seeing a significant shortage of Grade A office space in most city centres.
80%
70% For instance, in Edinburgh city centre with the Grade A vacancy rate
60% exceptionally low in Manchester (1.2%), Bristol (1.6%) and Leeds (1.8%) at
Respondents (%)

50% end Q2 2014.

40%
30%
20% Business parks located in areas such as these, where city centre supply
10% is constrained or of poor quality are likely to be more successful. As the
0% traditional core of city centres becomes more constrained business parks,
Low- and
zero-carbon offices

existing offices

Mixed-use
developments

City centre locations

Open-plan offices

Hub/incubator
spaces

High-rtise
developments

Conversion of
other building
types into offices

Business parks

Cellular offices
Refurbishment of

in particular those located in urban fringe environments, could benefit from

tapping into the overflow from an expanding city core.

Decrease Same Increase

“Scale, accessibility, amenities and access to
Source: BCO
a strong workforce are all essential to the 21st
However, it is simplistic to think that all occupiers want to be in town century business parks. The success of Milton
centres. Business parks are the preferred option for many, such as car Park, in Oxfordshire can be linked to these
borne sales organisations, and the research acknowledges that city
centres will fail to satisfy all demand due to limitations in floor plate and
criteria but is also in part attributed to the
a lack of car parking. fact that Oxford City has a confined central
historic core with limited Grade A stock and
The resilience of out-of-town take-up amidst other market evidence consistent investment through the property
suggests that town centres and business parks provide a different and
cycles has ensured a wide variety of different
potentially complementary offer to occupiers. In the Western Corridor there
is evidence of traditional Western Corridor based occupiers establishing space options have been available to meet
a presence in Central London whilst also maintaining their business rapidly changing occupier demands.”
park space. Telefonica, for example, acquired 50,677 sq ft at the Crown James Dipple, Chief Executive, MEPC
Estate’s Air W1 scheme in London’s West End. This move sees Telefonica
complement its UK campus on SEGRO’s Bath Road business park in
Slough by separating its new digital division into space in Central London.

4
BCO, 2011, The Challenge for the Office Sector over the next decade and beyond.

16 | Advance • The new geography of office demand: Business Parks – September 2014
 Transport linkages
4
The traditional business park model was based on a workforce driving to
work and having a plentiful supply of car parking. Over time accessibility
to public transport and a cycle network has increased in importance, due
to a combination of factors including demographics, the planning regime,
sustainability and global accessibility.
Proximity to an airport can also not be ignored – as companies increasingly
operate on a global scale and air travel becomes quicker, cheaper and time
critical many successful business parks are located close to an airport eg.
Stockley Park (Heathrow) and Edinburgh Park and the proposed Airport
City (Manchester) and UK Central (Birmingham).

Going forward the pressure for change will focus on more sustainable
“With the acquisition of the remaining
modes of transport and moving away from sole reliance on cars. Parks
located on the fringe of urban areas often benefit from established public development land at Edinburgh Park we saw
transport links and cycle paths, such as Chiswick Park and Uxbridge the opportunity to continue to develop out
Business Park. However, going forward, traditional out-of-town parks with one of the UK’s premier business parks that
access to new and existing public transport will also prove attractive to benefits from excellent road, rail and now
occupiers and investors. Examples include Edinburgh Park (new tram
link), Stockley Park (adjacent to West Drayton station which will benefit
tram links. We believe good public transport
from Crossrail services in 2019) and Green Park (proposals are due to be connections and amenities are the key to create
resubmitted by Reading Borough Council in 2014). successful business parks in the 21st Century.”
Oliver Millican, Managing Director, Parabola
Being near to existing or planned public transport provision is also an
integral part of judging a building’s sustainability credentials. This has
significant implications for locations which lack the necessary transport
UK Central (UKC) is a brand adopted by Solihull Council
infrastructure. However, business park owners such as MEPC and
to promote the concentration of infrastructure assets in their
Goodman have sought to address this challenge by introducing dedicated
boundaries which includes Birmingham Airport, two mainline train
shuttle bus services connecting to train stations and encouraging an
stations and three motorway junctions. The core assets have
ever-growing proportion of employees to cycle to work by introducing cycle
been master planned to 2040 and this is a prime example of
schemes. Reducing single occupancy car journeys is another goal.
transport connectivity being promoted as future-proofing a location
for businesses. The Hub is at the epicentre of UKC and includes
Winnersh Triangle, Winnersh Triangle is an 85-acre, mature Birmingham Business Park, the NEC, the expanding international
mixed-use business park and is home to more than 50 Birmingham Airport, Birmingham International train station, the M42
businesses. The Park benefits from an excellent strategic location motorway and the proposed HS2 Birmingham Interchange station
with its own rail station providing direct and frequent rail services which will allow London to be accessed within 40 minutes by 2026.
to Central London and Reading and, from 2019, will connect via
Reading to the high-speed Crossrail service. Winnersh Triangle is
also located less than five minutes from the M4 motorway and is
well located to access Heathrow airport.

Advance • The new geography of office demand: Business Parks – September 2014 | 17
 Supply of car parking
5
In spite of its less sustainable nature, travelling by car remains the most Figure 9: Changing Parking Ratios: Green Park, Reading
common form of commuting, covering 57.5% of the working population.
This figure rises to over 63% when London is excluded. The region with the 1:225
highest proportion of people commuting by car is Wales (67.4%), followed per sq ft
1:250
by the East Midlands (65.6%) and West Midlands (65.0%). per sq ft
1:300 1:350/
per sq ft 1:400
Two out of three people outside of London per sq ft
drive to work
Figure 8: Percentage of Workforce Driving to Work by Region (England & Wales)
90%

80%

70% 1990s Early Late Current

60% 2000s 2000s Pre-let
50% The combination of reduced provision for car parking and increased
40% occupational densities is driving demand for older buildings with more
30% generous parking ratios. Some 1980s/1990s buildings are being taken
20% back to the frame and rebuilt to utilise the generous parking ratio in place.
London South Yorks & North East South North West East Wales
East Humber East West West Midlands Midlands These schemes also benefit from reduced building costs and reduced
Source: ONS Census, 2011 embodied carbon in the new development. Maidenhead Office Park has
one of the best parking ratios in the Western Corridor at 1:180 sq ft and,
The continued dominance of commuting by car means that the supply of despite its relatively remote location, has experienced strong demand for
car parking continues to be a key driver of success for business parks, and space due to the parking on offer.
for out-of-town parks in particular.
“Where a park is located within a more urban
Car parking ratios for new office parks have been substantially reduced over
the past 30 years as planning policy has promoted public transport and town environment (fringe) proximity to public
centre developments. One of the most prominent business parks, Green transport is typically more important than car
Park in Reading, is highlighted here (see Figure 9) to show the trend to parking ratios. Where a park is reliant on public
more limited parking provision. However, it is also worth noting that there are transport rather than private travel then the
examples where local authorities have worked with developers to improve
the volume of parking on offer; in particular in more subdued office markets
public transportation must be comprehensive
where the economic benefits of employment generation are significant. and efficient for the park to be successful. A
shuttle bus alone won’t suffice.”
Alongside reduced provision for car parking, the increasing occupational
Jim Johnston, Managing Director, Goodman
density of office buildings is placing even greater demand on each space.

18 | Advance • The new geography of office demand: Business Parks – September 2014
 Building quality
6
Office real estate has an important part to play in terms of supporting
corporate identity. Corporate occupiers want their staff to be happy and
to retain them and increasingly see their real estate as a means of both
recruiting and retaining top talent. Having a high quality building in the right
location creates a positive image with potential new hires, investors and
partners. Given reported shortages of staff in high-skill sectors, we can
expect occupiers to increasingly demand high quality, modern, flexible
space to boost their attractiveness to workers.
At the same time, continued emphasis from corporate real estate
teams on cost control and efficiency gains has resulted in offices
becoming much denser, a trend that is set to continue. We can
therefore expect corporate real estate teams to be faced with the
challenge of further increasing densities and utilisation rates without
negatively impacting quality or worker experience.
The cost of human capital accounts for a
significant proportion of organisational costs
with the result that productivity is rising up the
corporate agenda.
A critical aspect of building quality is sustainability. Many corporate
occupiers set high standards in this regard, and research has shown the
health and productivity benefits of green buildings.
While modern business parks are setting a high standard, a particular
challenge for the overall market is the volume of outdated stock which no
longer conforms to occupier requirements. Business parks which fail to
offer the right quality of accommodation could be at risk of obsolescence.
There is a significant amount of first generation space built in the late
1980s and early 1990s that may be nearing the end of its life cycle, and
the need take to action has been accelerated by changes in corporate
requirements, new workplace technology and government policy changes.
The proposed legislative changes set out in the Energy Act 2011 could
imply significant refurbishment obligations for outdated stock. While not all
space will be suitable for refurbishment, there will be selective opportunities
to refurbish and reposition stock.
Investors and developers are already taking advantage of this opportunity
in the Western Corridor. Building 3 at Lotus Park, Staines is being
comprehensively rebuilt with the addition of a further floor to provide a total
of 69,382 sq ft of Grade A office space, while Buildings 3 and 4 at Status
Park, Heathrow have also undergone refurbishment in 2014 delivering
42,000 sq ft of high quality accommodation.
The lower EPC rated business park buildings
with an historic car parking ratio in place
are real opportunities for developers and
investors alike.

Many of the UK’s premier business parks are already targeting high
sustainability criteria with just some prominent examples highlighted below:

ü MEPC’s Birchwood Park5, Warrington won a prestigious Green Apple

award in 2013 for its commitment to sustainability.
ü Goodman targets a BREEAM “very good” rating as a minimum
standard for all its new buildings.
ü Green Park, Reading, markets itself as having ‘solid’ green credentials
with a 120 metre wind turbine which generates 2.3 megawatts of
power annually, enough to power 1200 homes6.
ü White Rose Office Park, Leeds, has installed a new LED lighting
system for its car parks reducing the energy consumption of one car
park alone by 70% and making CO2 savings of 95 tonnes per year.

Green Park, Reading

5
park recently acquired by PATRIZIA/Oaktree
6
www.greenpark.co.uk

Advance • The new geography of office demand: Business Parks – September 2014 | 19
 Amenity offer
7
Just as the quality of a building is a key factor in attracting occupiers, the
quality of amenity and the surrounding environment is also vital. Successful Hatfield Business Park, is a strong example where a huge effort
business parks will be those that can distinguish themselves from the has been given to place making. In the 1990s BAE’s decision to
rest of the market by the emphasis that is given to place making. This is close the Aerodrome resulted in a loss of 8,000 jobs. Working
undoubtedly easier to achieve in more urban environments where many of alongside the local authority Goodman have worked to regenerate
the amenities are already in place. However, it can also be engendered in the site to create one of the largest mixed use parks of its type.
out-of-town campus style environments. Its success can in part be attributed to the ability to develop to a
large scale as well as its success in attracting a very diverse range
of tenants. There are a vast array of employers on site covering a
“Goodman pays great attention to the range of activities including distribution, tech and IT. The University
preferences of a diverse workforce. of Hertfordshire also provides benefits facilitating cross overs and
Successful business parks must offer touch points with other companies. There is extensive amenity
provision including sports, leisure and retail facilities and a host of
animation, amenity and activity. In other
events and activities help to create a sense of community.
words they must offer an environment
which provides a sense of place and smooth
transition between work and recreation.”
Jim Johnston, Managing Director, Goodman

The presence of cafés, bars, convenience stores, gyms, schools,

crèches and doctors helps to create a sustainable community that
can compete with the town centre offer. The UK’s premier parks go
further and look to create a sense of fluidity between work, home and
recreation to a greater extent than before.

However, the traditional business park model included very limited

amenity use and no residential use on site so many established
business parks in the UK have had to adapt to survive and create a
sense of place. Given the growing importance of place-making, it is
generally to the mutual benefit of occupiers and landlords to commit to
funding the provision of services through the estate charge.

20 | Advance • The new geography of office demand: Business Parks – September 2014
Incorporating residential uses adjacent to employment sites correlates
with government policy and we are seeing some business park owners
rework their master plans to incorporate residential and mixed-use
elements. A current example is Edinburgh Business Park, where a
new master plan is being prepared to include new homes, offices,
ancillary retail and leisure facilities. This is on the back of the City of
Edinburgh identifying the site as an early mixed-use redevelopment
site in its Proposed Local Development Plan. Thorpe Park in Leeds is
also being re-planned to become a more mixed-use park with a greater
sense of community. The park is being designed around ‘walkability’
to enable tenants to walk between amenities as they would in a town
centre. Canmoor is also considering improving the amenity provision at
Birmingham Business Park.
As these and other large-scale developments seek to create sustainable
mixed-use communities we are likely to see a greater push for revised
planning to allocate employment land to amenity and/or residential.
Thorpe Park, Leeds
6
www.kings-hill.co.uk
Advance • The new geography of office demand: Business Parks – September 2014 | 21
Kings Hill in West Malling, Kent is marketed as a ‘sustainable
business and residential community’. Liberty Property Trust UK has
created one of the largest mixed-use developments in Europe on
this 800-acre site which houses international and local businesses
which provide employment for its residential community. A ’village’
offers retail, schools, sports and leisure facilities and, as well as
on-site walking and cycling, there are also good public transport
links to London and beyond. To date, employment space for 5,000
people and homes for 7,700 people have been developed and 15%
of households have one person employed by a Kings Hill business6.
“The new plan for Thorpe Park sets out to
offer a unique environment by blending
the best features of a business park (eg.
motorway access, landscaped environment)
with facilities and amenities often only found
in city centres (eg. layout, amenities, mix of
uses and higher density buildings).”
Mark Jackson, Managing Director, Scarborough Group
Outlook for office parks

While business parks face an ongoing challenge, we expect that many parks will continue to
thrive. However, performance will vary widely depending on whether individual sites take the
steps required to maintain their attractiveness to occupiers.

Look for drivers of success to assert their value over time
The key drivers of successful business parks identified in this report
summarise the criteria that we believe business park owners and
investors need to address to keep up with the competition. Look for
the implementation of these strategies and attributes to separate the
successful parks from the rest of the pack in coming years:
• High quality sustainable workplaces which inspire and support the
corporate productivity agenda
• An attractive environment which provides a place people want to go to
• A long-term plan to both control the environment and adapt to change
• Where ownership is fragmented, a means to ensure one entity
controls strategy to ensure a coherent approach
• Effective transport linkages and provision of car parking
The sustainability agenda is interwoven into many of the key drivers and
adaptation will be increasingly vital. Business parks offer an excellent
opportunity to build sustainably, but many parks are behind the curve,
and will need to take action in coming years to ensure continued viability.
Infrastructure improvements will unlock potential
Given the vital importance of transport linkages, planned infrastructure
attraction of strategically located parks, often well ahead of actual
delivery, and occupiers and investors should keep a close eye on plans
as they evolve.
Office parks to outperform standard offices, but expect a two
tier market
Having had a prolonged period of subdued performance, we expect
that the performance of the aggregate business park sector will
improve in coming years. Total returns have been held down due to
persistent falls in capital values driven by falling rents and outward
yield movement, but this is beginning to turn around, and investors can
expect solid total returns over the next few years.
Values are now rising, with yields moving inward from their peak and
rental growth returning. In fact, we expect that 2014 will see positive
rental growth from the rest of UK segment for the first time since 2007,
and this growth should persist over the forecast period.
Figure 10: Historic and forecast rental growth
5%
4%
3%
2%

improvements in coming years have the potential to add significant 1%

0
value to business parks within their reach. For instance, the Western -1%
Corridor market will benefit from Crossrail, the electrification of the -2%
-3%
Great Western mainline and improvements to Reading station. Looking -4%
further ahead, HS2 and the expansion of airport capacity at Heathrow -5%
-6%
will add further impetus.
-7%
-8%
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Other cities will also see upgrades and additions to their transport
infrastructure, and these along with national initiatives such as HS2 Office Park London & SE Office Park Rest of UK
have the potential to reshape the market. They will reinforce the
Source: IPD and JLL

22 | Advance • The new geography of office demand: Business Parks – September 2014
Owing to the turn-around in values and continued strong income return, Wider trends favour continued growth of fringe business parks
we expect total returns for office parks to exceed standard offices over We believe that the trend to greater urbanisation and the drivers of
the forecast horizon. Office parks are forecast to see an average return success we have identified will spur on the growth of fringe business
of 11.2% from 2014-18, greater than standard offices with 9.2%. parks. These edge-of-centre developments, where all the benefits of
a business park coincide with a transport hub and an urban location,
Figure 11: Historic and forecast total return will flourish in coming years. They can more easily compete with and
25% complement the city centre offer and provide the required transport
linkage and broader amenity. In cities with a supply constrained core,
20% they are also positioned to benefit, particularly where they can provide
cost effective Grade A space.
15%

Out of town business parks will have to work harder. They will remain
10%
viable in many locations where there are established clusters, but
5%
overall stock may fall over time. Many of these parks benefit from
scale, site flexibility and a single-ownership profile that cannot easily be
0% achieved in a city centre location. However, they will have to continue
2013 2014 2015 2016 2017 2018 Average
2014-18 to adapt to ensure continued attractiveness to occupiers.
Standard office Office Park London & SE Office Park Rest of UK

Source: IPD and JLL

We expect total returns for office parks to
Despite the improved aggregate performance picture as economic exceed standard offices over the forecast
headwinds clear and confidence returns, we expect to witness a two-tier horizon.
market, split between sites that are adapting to meet the needs of today’s
occupier and provide strong competition or space that is complementary
to the proximate city centre offer, and those that are not.

White Rose Office Park, Leeds

Advance • The new geography of office demand: Business Parks – September 2014 | 23
JLL

Business contacts
Angus Minford Mark Wilson James Finnis Jeremy Richards
Director – Capital Markets Director – Capital Markets Director – Office Agency Head of National Offices
+44 (0)207 087 5350 +44 (0)207 399 5874 +44 (0)208 283 2534 +44 (0)117 930 5745
angus.minford@eu.jll.com mark.wilson@eu.jll.com james.finnis@eu.jll.com jeremy.richards@eu.jll.com

Research contacts
Jon Neale Ben Burston Vicky Heath
Head of UK Research Head of UK Office Research Associate Director – Research
+44 (0)207 087 5508 +44 (0)207 399 5289 +44 (0)117 930 5738
jon.neale@eu.jll.com ben.burston@eu.jll.com vicky.heath@eu.jll.com

The new geography of office demand 2: Business Parks rising to the challenge – September 2014

jll.co.uk

© COPYRIGHT JONES LANG LASALLE 2014. This publication is the sole property of Jones Lang LaSalle IP, Inc. and must not be copied, reproduced
or transmitted in any form or by any means, either in whole or in part, without the prior written consent of Jones Lang LaSalle IP, Inc. The information
contained in this publication has been obtained from sources generally regarded to be reliable. However, no representation is made, or warranty given, in
respect of the accuracy of this information. We would like to be informed of any inaccuracies so that we may correct them. Jones Lang LaSalle does not
accept any liability in negligence or otherwise for any loss or damage suffered by any party resulting from reliance on this publication.