Stevenage office market faces availability crisis
In 2013 Permitted Development (PD) was introduced, which effectively allowed offices to be converted into residential space without obtaining planning consent.
At the time, there was over 530,000 sq ft of office space available in Stevenage with a take-up figure of 65,000 sq ft per annum, meaning there was eight years supply of office space in the town. But whilst having far more supply than demand is an unhealthy ratio, the introduction of PD has taken the dynamics of supply and demand to the other extreme. Available office space is now dangerously low in supply for local businesses looking to move and new companies looking to relocate to the town.
In 2016, take-up of new office space rose to over 135,000 sq ft. Now, as we approach the middle of 2017, there remains just 120,000 sq ft of office space available in Stevenage – that’s less than 1 year’s supply!
There is no doubt that the idea behind PD was an excellent one, as office buildings that were lying vacant were transformed into much needed residential accommodation. However, as is so often the case when Governments interfere, they simply do not consider the extent to which their actions will distort the longer term market.
Consequently, during the last three years, over 500,000 sq ft of office space has been converted to residential in Stevenage alone. This is despite the fact that Stevenage applied to have part of Gunnels Wood Road protected from these PD Rights and were successful in being one of the very few areas in the country that could refuse PD Rights in certain locations within the town.
If this had not happened then undoubtedly the conversion from offices to residential would have been substantially worse and Stevenage would have become even more of a commuter town rather than providing a place for people to live and work without having to travel vast distances.
The uncertainty in the current market caused by annual Elections has certainly effected the confidence of businesses, which means current demand for offices is not particularly strong and therefore the real impact caused by the shortage of space is yet to be fully realised. The real problem will have to be faced once economy does picks up and demand for offices starts to increase, because there will be no buildings available to satisfy that demand.
NOTHING AVAILABLE OVER 25,000 SQ FT
Even today in mid 2017, if a company wanted to relocate or move into Stevenage and required a building of more than 25,000 sq ft, there is not a single suitable premises within the town that could accommodate that size. It means they would have to move out of the town, or not move here at all, and neither option is good for local business.
Furthermore, there is no land suitable for commercial development available in Stevenage, and even if that land was available the current rents are not high enough to support any speculative office development. Which means the prospect of any new office schemes being undertaken in the town are, at best, long way in the future, and the dwindling remaining stock remains all that’s available to satisfy the needs of businesses looking for space within the town.
Clearly, there is a demand for more residential housing, but the result of successive Governments subsidising the residential market is that residential values are outstripping commercial values. Landlords, therefore, should not be blamed for converting commercial properties into residential properties if they are going to increase the value of their portfolio!
I believe the Government and Local Authority need to readdress this balance by encouraging land owners and developers to build offices speculatively, in order to provide for future demand for office space. Otherwise, it’s not only Stevenage that will lose the opportunity to accommodate growing businesses and end up as a town of commuters who travel to other locations to obtain employment.
Mike Phoenix, Partner, Brown & Lee Stevenage