Lambert Smith Hampton Agenda - Issue One by Nathan Turner

Agenda Lambert Smith Hampton

Issue One / Q2 2008

Thrills and spills UK and Ireland’s elite property professionals take on the Italian Alps

Inside this edition » Mark Berrisford-Smith, HSBC Senior Economist, comments on the economy » Hertfordshire County Council: making a difference » Environmental responsibility steps up the property agenda » HBOS’ Peter Cummings talks leadership, risk and strategy

Agenda / Issue One / Q2 2008 / Introduction

elcome to the first edition of our

Lambert Smith Hampton (LSH) is a leading

While this gives us greater resilience to

new client magazine, Agenda.

provider of commercial property services and

fluctuations in transactional markets, the

Incorporating news from both

advice across the public and private sectors.

more significant benefit is that it means we

our national business and the wider economic

With a network of 28 offices spanning the UK

can offer comprehensive services to clients

and property markets, Agenda aims to keep

and Ireland, LSH has full national capability

whose demands might be concentrated

you up-to-date with the hot topics that are

and market understanding.

by a tightening economy. Whether that’s ways to refinance, solutions for improved

affecting your business. In 2007, LSH exchanged contracts for a

management, ideas on consolidating

Management Buy-Out (MBO) from our parent

portfolios, improving existing stock to leverage

company Atkins to take the business private.

rental growth, or advice on realising asset

The deal has given LSH control and ownership

value, to name just a few.

of its own future; to make that future an even better one for our staff and clients.

In addition to our strong financial performance, LSH continues to secure

Almost a year on, the company has gone from

leading industry awards, including the ‘UK’s

strength to strength. In spite of the challenging

Most Active National Agent’, ‘Top National

economic climate, we are continuing to grow.

Office and Industrial Agent’ (Estates Gazette’s

In addition to the purchase of two leading

‘EGi Deals Competition’) and ‘Industrial

commercial property businesses to add to

Agency Team of the Year’ (Property Week

our national network; Poolman Harlow in

Property Awards).

Swansea and Young & Butt in Fareham and Southampton, we were delighted this April to

While the economic headlines will get worse

welcome more than 20 planners and public

before they get better, from a LSH perspective,

sector specialists from Erinaceous.

we’re ready to respond to the challenge, and are working harder and smarter in 2008 to

Further highlights have seen our market-

achieve for our clients.

leading Building Consultancy team growing 20 percent year-on-year, alongside increased

I hope you find Agenda informative. If you

revenues in Industrial Agency and Office

have any queries or comments please do not

Agency. Income from LSH’s strategic

hesitate to contact me at marigby@lsh.co.uk

consultancy divisions represent 65 percent of

or on +44 (0)20 7198 2011.

our total income.

Mark Rigby Chief Executive

Agenda / Issue One / Q2 2008 / Contents

Contents 02

A fast-changing climate for the new financial year Mark Rigby considers the economic conditions and the impact on commercial property

UK stands firm against economic winds from across the atlantic Mark Berrisford-Smith, HSBC Senior Economist, comments on the economy

Investors cash-in despite market gloom Appetite remains in the commercial property industry to seek growth

Is equity the new debt? LSH’s Q1 ‘UK Investment Transactions’ Quarterly Bulletin shows that commercial property yields now exceed finance rates for the first time in 18 months

A fundamental issue: it’s all about risk Peter Cummings, Chief Executive, Bank of Scotland Corporate on commercial property, deal making, the credit crunch… and diving!

Competition thrives at the Lambert Smith Hampton Ski Challenge 2008

Making a difference As LSH secures new local authority contracts with Wandsworth, Ealing, Hammersmith and Fulham, and Lambeth, Tony Comer, County Property Officer at Hertfordshire County Council talks to Agenda about what makes these alliances so viable

City spotlight: Manchester v London Agenda resurrects the north v south competitive spirit to compare two great cities

LSH’s National Office Report reveals leading locations

The LSH Redgrave Pinsent Golf Classic Fine conditions and stiff competition as players and celebrities vied to win the coveted trophy and raise money for children’s charity SPARKS

Survey reveals fears as rating legislation bites Warnings from a survey of 100 developers, investors and occupiers

Lambert Smith Hampton Agenda Magazine Issue One / Q2 2008

The environment: property’s responsibility Climate change pushes environmental responsibility up the corporate and social agenda

Editor Sandy Townsend

Sustainability comes cheaper by the dozen LSH responds as the Government commits to tough green targets

Art/Production Director Nathan Turner

Yell relocates its UK head office

Agenda flashback Mark Rigby looks back at LSH’s maiden victory in the Annual Surveyors’ Rugby Sevens

Content Contributors Sandy Townsend, Nicola Durbridge, Mark Oldfield, Elizabeth Bartlett, Holly Rigby, Shani Wilson, Anna Silkstone, Laura Scott, Liz Chapman, Victoria Walker

Agenda / Issue One / Q2 2008 / The Budget

2 / Lambert Smith Hampton

Agenda / Issue One / Q2 2008 / The Budget

An uncertain start for the new financial year Mark Rigby, Chief Executive of Lambert Smith Hampton, considers the current economic climate and conditions for commercial property.

ust three months into the financial year,

Not all businesses were happy with the plans

As many of us in commercial property know,

Chancellor Alistair Darling has all but

announced in the pre-Budget statement for

the premise upon which the Government has

admitted that the UK credit market has

changes to CGT however. For entrepreneurs,

based its policy is simply wrong.

hit crisis point. His support for the Bank of

the 10 percent rate for many business assets

England’s injection of £50 billion into the

was increased to a flat rate of 18 percent on

The tax appears to suggest that property

financial markets tells a powerful story. The

sales of business assets over £1 million in value.

owners deliberately leave property empty in the hope of achieving higher rents.

exchange of banks’ mortgage debts for secure Government bonds to deliver a sense

Corporate lobbying forced the Chancellor

As owners aim to seek a return on their

of increased security will stimulate inter-bank

to reduce the impact on entrepreneurs

investment, surely it is unmistakeably clear

lending once again. So far, however, the

of his contentious proposal. The new

that this can best be achieved through

impact of this unprecedented decision seems

‘entrepreneurial relief’ now means that the

promptly letting the premises?

limited and the ongoing lack of liquidity

first £1 million of gains that qualify for relief

is likely to see property prices continue to

are charged at an effective rate of 10 percent.

My view is that the property sector should

fall. Worryingly, data released in early June

Gains in excess of £1 million will be charged

have shouted both louder and earlier if we

showed that the UK services sector, the

at the standard 18 percent rate.

wanted to avoid this debilitating tax.

This effective lobbying action should be seen as

EPR aside, there are some positives to

an example to the commercial property sector.

reflect on. Rental growth performance is

bedrock of our economy, slowed for the first time in five years.

encouraging, with activity in the occupational

Banks’ lack of lending confidence is seen in the LIBOR, now nearly a full point higher than

Empty Property Rates

markets evident. I fear, however, this will

the base lending rate. As a consequence,

The controversial and heavily criticised Empty

not be sufficient to overcome the significant

there has been a marked reduction in trading

Property Rate (EPR) legislation was also

shift out in yields and prevent the downward

volumes, showing only £7.3 billion worth

announced in the pre-Budget statement.

trend in commercial property investment

of property transacted in Q1 2008 – down

While it met severe opposition from across

returns. There will always be opportunities

from nearly £14 billion in Q1 2007 (LSH UKIT

the whole industry, no genuinely effective

to make one’s property assets work harder,

Annual Report 2007).

lobbying action was taken.

let’s not miss that point, but, in this uncertain

The result is that the economic spotlight

The British Property Federation, along with

shines fair and square on market fluctuation,

the British Retail Consortium, Business Centre

not the uneventful Budget.

Association and the corporate occupier’s body

Facing up to this current credit crunch, it’s

CoreNet Global, has called for the legislation

certainly not time to throw in the towel or to

Despite this, the Budget delivered some

to be dropped – but far too late. That horse

put one’s head in the sand. Instead, it’s time to

unexpected changes which will impact on the

had already bolted – mobilisation would have

work harder and smarter in order to succeed.

commercial property market, one of which

been needed at least five months pre-Budget

History tells us that there’s plenty of action

is capital gains tax (CGT). The Government

to accomplish any successful change.

to be had in a depressed market if you know

market, it makes even more sense to secure professional advice at the earliest opportunity.

what you are doing and have the insight and

has scaled back CGT on property to a flat

intelligence to make the right plays.

rate of 18 percent from 6 April – a reduction

John Healey, Local Government Minister,

of 22 percent. Although unintentional, the

rebuffed the calls for change. “The fact is

new legislation will make it more attractive

that these reforms . . .will potentially reduce

More on the Government’s Empty

for investors to sell properties, relieving the

commercial rents by bringing empty buildings

Property Rates legislation on page 20.

pressure of the lack of liquidity we have

back into use,” he said.

experienced in the market. The bad news, however, is the abolishment of two valuable tax reliefs, which could substantially reduce any CGT bill.

Lambert Smith Hampton / 3

Agenda / Issue One / Q2 2008 / The Credit Crisis

UK stands firm against economic winds from across the atlantic A recent UK National Budget Review hosted by Lambert Smith Hampton revealed that the UK commercial property market is holding amid fears of a US economic recession. satisfactory 3.5-4 percent this year. Although this represents a significant slowing after the frenzied expansion of recent years. Analysing the current economic situation from a property perspective, Martin Treacy, LSH Building Consultancy, agreed. He said that the housing market was no doubt going to be affected negatively - it was impossible to maintain the enormous price increases witnessed over the last few years. House prices are now lower than they were in May 2007 (by over 4 percent) and are predicted to fluctuate in line with inflation. This is

reflected in the commercial property market,

prospects for the housing market, that was

According to both speakers, other commercial

he UK economy is now showing clear signs of weakness, with higher inflation eating into peoples’ discretionary

spending, and fears mounting about the the message of the LSH Budget Review. According to guest speaker Mark BerrisfordSmith, HSBC Senior Economist (pictured), economic growth in the UK will slow to a lacklustre 1 percent this year, and to just 0.5 percent in 2009. It will be the toughest period for the economy since the early 1990s. An outright recession is by no means a foregone conclusion, but the risks have increased significantly. Moreover, with consumer price inflation having breached 3 percent the Bank of England has little room for manoeuvre to slash interest rates. A lot is therefore riding on the Special Liquidity Scheme to help ease the logjam in the money markets and to bring down the cost of borrowing for households and businesses. With the US economy already close to recession, it will be left increasingly to the large emerging economies (especially China and India) to sustain global growth. The world economy is still expected to grow by a

4 / Lambert Smith Hampton

with rents peaking in 2007, and now settling down to a more gradual growth throughout

The housing market was no doubt going to be affected negatively it was impossible to maintain the enormous price increases witnessed over the last few years. Martin Treacy Building Consultancy Lambert Smith Hampton

2008 – 2009.

property ramifications from the Budget included enhanced capital allowances, available tax relief on ‘green’ buildings, VAT relief on derelict buildings and Energy

This lack of capital resource, coupled

Performance Certificates – all indicators that

with the stringent new ‘green’ agenda

the Government was bringing the UK in line

proposed by the Government could lead to a

with the rest of Europe’s ‘green agenda’.

significant downturn in the quantity of new commercial developments.

Martin said: “The Budget did include widely unpopular legislation in the shape of enforcing

Martin concludes: “It’s tough right now

new restrictions to Empty Property Rates relief,

but despite predicted downturns in the

predicted to line the Government’s pockets

development of new commercial property, the

upwards of £1 billion at the expense of the

figures tell us that rents are still rising and at

commercial property market.

worst, set to plateau.”

“This was an untimely decision. Economic

Next issue of Agenda: Ireland’s economy.

stability and growth will continue only as long as the Government succeeds in managing the

For further information, please contact:

economy and inflation effectively.”

Martin Treacy, Building Consultancy E: mtreacy@lsh.co.uk

In addition to this, as a result of the financial

T: +44 (0)20 7198 2140

market struggling to adjust to losing banks, such as Bear Stearns and Northern Rock,

Nick Lloyd, Investment

the ensuing credit squeeze has resulted in a

E: nlloyd@lsh.co.uk

significant increase in borrowing parameters.

T: +44 (0)20 7198 2221

Agenda / Issue One / Q2 2008 / The Credit Crisis

Commercial property investors cash-in despite market gloom While there is evidence that some investors are moving out of property and into cash, there is still an appetite within the commercial property industry to seek growth.

any intuitive fund managers

Improving rental growth and activity

a reduced development pipeline, money is

are taking full advantage of the

The tough business environment has led

being invested to upgrade existing stock as

present lull by re-evaluating their

to a noticeable increase in refurbishment

opposed to buying new.

property portfolios in an effort to derive

and revelopment programmes to improve

greater value from their existing stock.

rental growth and leasing activity. These aim

However, there are numerous, complex

to maintain asset value, while leveraging

factors that must be taken into account when

the attractiveness to potential purchasers

formulating the correct refurbishment or

for when the investment market recovers.

redevelopment strategy. For example, the age

As a direct result, landlords are seeking

and type of the building, legal implications

professional advice on the re-gear or

associated with leases, planning and

termination of existing leases to enable them

development constraints, and environmental

to carry out the works.

issues. All of which are likely to have a negative impact on an asset’s profitability if

Driving income –

not fully appreciated.

68 percent occupancy increase LSH’s implementation of performance

Fund managers seize opportunities

enhancing strategies was demonstrated at

It is a common misconception that the key to

Mansion House, Altrincham, on behalf of

rental growth lies predominantly with high-

Morley Fund Management. Tony Howlings,

value, high-profile, multi-occupied buildings.

LSH Asset Management, said: “Following a

Yet, a mere handful of secondary or tertiary

two-year planned refurbishment programme

properties can present vast opportunities to

to the common areas and vacant units,

even the most prudent fund manager.

occupancy levels rocketed from 23 percent to 91 percent and rental values rose from £14

The market is showing little sign of respite,

per sq ft to £15.50 per sq ft. The building

owing to the increase in shorter leases,

was eventually sold as a direct result of the

occupiers exercising their break clauses, the

increased income and improved local image.”

rising costs of development and the financial burden of legislative initiatives such as the

Robin Mitchell, LSH Lease Advisory, added: “In

Empty Property Rates reform. Therefore

addition to these planned strategies, landlords

fund managers will no doubt be demanding

who have already implemented refurbishment

solid asset management strategies for the

programmes at their own expense are

foreseeable future, as they endeavour to make

also hoping to ride the current wave of

their property portfolios work harder for them.

opportunity by hastily completing works in order to achieve a strong rent for use as a

For further information, please contact:

comparable in upcoming rent reviews.”

Tony Howlings, Asset Management E: thowlings@lsh.co.uk

These are not radical new strategies, but tried

T: +44 (0)114 270 2709

and tested opportunities that have always existed. Yet, recent market dynamics were

Robin Mitchell, Lease Advisory

such that investors would typically plough

E: rmitchell@lsh.co.uk

their capital into purchasing new-builds or

T: +44 (0)20 7198 2180

trading further. Now that there is a slowdown in the quantity of transactions and

Lambert Smith Hampton / 5

Agenda / Issue One / Q2 2008 / UK Investment Transactions

In light of the recent economic concerns, Lambert Smith Hampton’s annual financial and market research reports are becoming increasingly essential to our clients. LSH’s Property and Economic Bulletin provides authoritative forecasts for rental growth, investment yields and total returns, against the backdrop of the latest data on the health and direction of the UK economy. UKIT is published quarterly and gives a snapshot of the investment transactions that have been reported over the past six month period, while the Weather Map supplies market leading forecasts for the office, retail and industrial sectors. Together, these reports give LSH an in-depth knowledge of the market and current economic conditions that allows us to provide our clients with the best possible service.

Ezra Nahome has recently been named as the ‘Seventh Best Investment Agent in Britain’ as voted by the property industry in Property Week’s search for Britain’s 100 Best Agents

6 / Lambert Smith Hampton

Agenda / Issue One / City Spotlight

Agenda / Issue One / Q2 2008 / UK Investment Transactions

Is equity the new debt? » Opportunities on offer for capitalised investors » Q1 sees largest quarterly movement in yields since 2000

he slide in commercial property values has inevitably created opportunities for investors with cash. Lambert Smith

Hampton’s (LSH) recent Q1 ‘UK Investment Transactions’ Quarterly Bulletin revealed that the average yield on transactions moved

Transaction turnover in the first quarter 2008 was almost 50 percent down on the comparable period in 2007 and if the trend continues the market is set for a quiet year.

out by 83 basis points in the first quarter of 2008 as institutional investors continued to sell property. The yield movements pushed

The worst affected sectors were the industrial

In the second quarter of 2008 the market has

the markets into what LSH has called the

and retail markets where yields were up

become very difficult as the impact of rising

‘deal value zone’ - that point of the market

by 80 basis points and 91 basis points

oil prices and other commodities have sent

where property yields are above finance

respectively. The office sector held up better

shockwaves through the financial markets.

costs and more importantly where a sense of

than the market as a whole with an outward

Ezra commented: “At present it is easier to

fundamental values has returned.

movement in yields of 43 basis points.

raise equity than debt, therefore the market

Ezra Nahome, LSH’s Head of National

Overall transaction levels remained broadly

resources to push through purchases. This

Investment, said: “The yield movements have

in line with the final quarter of 2007, with

is a different market to any other we have

created some very interesting opportunities

£7.3 billion of business being conducted in

experienced in the past fifteen years and is

for investors, and we have seen well financed

Q1 2008 compared to the £7.8 billion in Q4

certainly not for the faint hearted!”

private property groups, UK Life Funds and

2007. The first quarter 2008 total was almost

oversees investors pick up some good deals.”

50 percent down on the comparable period

Many transactions are now taking place at

in 2007 and if the trend continues the market

levels of 7.0 percent and above and values

is set for a quiet year. We are predicting total

look set to fall further during the course of

turnover of £25 billion for the year, compared

this year.

is being driven by investors who have the

At present it is easier to raise equity than debt, therefore the market is being driven by investors who have the resources to push through purchases. Ezra Nahome Head of National Investment Lambert Smith Hampton

with £56 billion for 2007. It must be noted that the UK, and in particular Ezra said: “Institutional investors were forced

London, is a truly international market and in

into selling some of their stock by withdrawals

the mix there is a wealth of investors who will

from some of their unitised funds. This

provide a reasonable level of activity as we

brought forward some good quality stock to

steer our way through these difficult times.

the market which was largely purchased by well financed private property groups and

For further information, please contact:

overseas investors. I believe this trend will

Ezra Nahome, Head of National Investment

continue and as the impact of significant

E: enahome@lsh.co.uk

increases in the benchmark five year swap rate

T: +44 (0)20 7198 2222

takes hold, there will clearly be implications for many geared borrowers as cashflow becomes increasingly tighter.”

Lambert Smith Hampton / 7

Agenda / Issue One / Q2 2008 / HBOSâ&#x20AC;&#x2122; Peter Cummings Interview

8 / Lambert Smith Hampton

Agenda / Issue One / Q2 2008 / HBOS’ Peter Cummings Interview

A fundamental issue: it’s all about risk In our inaugural issue of Agenda Lambert Smith Hampton talks to Peter Cummings, Chief Executive, Bank of Scotland Corporate about commercial property, deal making, the credit crunch… and diving! Words Sandy Townsend

ith almost 35 years of corporate

“We’ve been a property bank for years,

and I’ve experienced some real virgin stuff ‘BT’

banking under his belt, Peter

we’re not new to the industry. From 2001 to

– before tourists!”

Cummings has seen the UK

2003 we increased our property book but in

economy through many highs and lows.

mid 2006 slowed the growth in our lending

And what’s Peter’s tip for the property

HBOS was created from the merger between

because we saw the road ahead.

professional looking to navigate the present choppy waters within the UK economy?

Halifax and Bank of Scotland in 2001. Peter came to the helm of its Bank of Scotland

“The dynamics of the sector are such that

Corporate Division in 2005 and has turned

the supply of funding is currently a major

“Stick to the fundamentals. This is the age

the Division into one of HBOS’ most profitable

constraint to growth, but it was all getting a

of the property person, not the financial

and successful.

bit frothy for a while.

engineer. You need to look at what is the real estate aspect of the investment, how it can be

“The banking sector has undergone a very

“Property is for property people. You need

improved and managed. That’s where value

challenging time following the credit crunch.

time on the clock to truly understand the

added always comes in the long term.”

The key thing is to have the right leadership

market. You can’t expect to know the

and right risk strategy.”

intricacies of property within five minutes.”

“Financial services are one of the UK’s

According to Peter, it’s this time on the clock

said. Peter cites a key highlight in his career

core competencies for the economy,

that will see HBOS stick with real estate as an

is having had the opportunity to make a

which will continue to grow and provide

asset class in the present economic climate. The

difference, and warns organisations not

jobs for individuals with highly intellectual

bank views that there are still opportunities to

to view great service as a cost but as a

and innovative personalities, who want

be had in an environment that is conducive to

differentiator and driver of growth.

international opportunities.”

long term corporate growth.

Providing great client service and helping clients to make a difference is also key, he

“Businesses need to start looking at service as And he’s a man true to his word. Bank of

“Rigorously reviewing opportunities has

adding value and responsiveness to your client

Scotland Corporate continues to pursue

always been HBOS’ rule book but we must

as part of your value chain. This ultimately will

growth opportunities even in these turbulent

remember that the past is for reference only,

benefit both you and your client.”

times. Peter’s Division follows an Asset

not for living in. It’s the future that we base

Class Management model, which includes

our risk outlooks on.”

For further information on LSH’s services to the banking sector, please contact:

integrated finance, private equity, transport, oil and gas, joint ventures and, of course, real

This passion for a challenge and risk analysis

Ezra Nahome, Head of National Investment

estate. The goal is to be the best within each

and management is not constrained to the

E: enahome@lsh.co.uk

asset class.

world of corporate finance. Apart from being

T: +44 (0)20 7198 2222

a Glasgow Celtic and Stevie Nicks fan, Peter “Real estate is an important asset cycle for

is an avid diver and has descended in remote

David Gilbert, Valuation

HBOS. We are an investor and at all points of

and dangerous locations such as the freezing

E: dgilbert@lsh.co.uk

the cycle we see opportunity. We need to be

waters of Scapa Flow in the Orkneys, to

T: +44 (0)1865 200 244

alive to the fact that in a period of uncertainty

shark territory 200 kilometres off the coast of

opportunities will arise,” he said.

Australia and waters near the Sudanese border in what is now classified as a military zone.

“I believe that the people that we invest alongside in property are the best in class,

But, what drives this passion for risk? “I just

they are entrepreneurs and they are well

enjoy it and I enjoy travel. I’m no longer a

placed to analyse the opportunities available.

fanatic but I’ve been diving for 20 odd years Lambert Smith Hampton / 9

Agenda / Issue One / Q2 2008 / Lambert Smith Hampton Ski Challenge

Lambert Smith Hampton Ski Challenge 2008 This year’s Lambert Smith Hampton Ski Challenge kicked off with everyone anticipating more thrills, a few spills and the fiercest competition seen yet. Words Holly Rigby

ith around 650 skiers in

Konrad Bartelski, GB downhill legend and

“We are proud to host the LSH Ski Challenge

attendance, the Ski Challenge lived

veteran of three Olympics, was back once

and delighted by the support that it receives

up to all expectations. It has once

again to host a giant slalom race clinic.

from right across the industry,” said Mark.

again earned its long-established place as one

Britain’s highest ever achieving ski athlete

“Whether the market is buoyant or more

of the hottest events on the property calendar

helped skiers to warm up for the race, giving

challenging, there is no substitute for

– property’s own ‘MIPIM on the snow’.

competitors invaluable tips to gain that

networking with colleagues and clients. Here’s

competitive edge against the opposition.

looking forward to 2009!”

Under perfect blue skies and bright sunshine,

For further information, please contact:

the LSH Grand Slalom Ski Challenge 2008

Katherine Simpson, Events

The stage was set with snow conditions being

provided its record number of attendees with

E: ksimpson@lsh.co.uk

the best that they have been in the Italian Alps

the perfect start. Competing for the first time

T: +44 (0)20 7198 2072

for many years. Skiers and snowboarders alike

ever, Mark Rigby, Chief Executive of LSH, led

were keen to get back into the groove and

the home side along with Head of National

‘chase the powder’ in the days leading up to

Investment, Ezra Nahome.

One key investment agent noted “I get more out of this trip than I do attending MIPIM.”

the competition.

10 / Lambert Smith Hampton

Agenda / Issue One / Q2 2008 / Lambert Smith Hampton Ski Challenge

Valadâ&#x20AC;&#x2122;s Head of Property, Didier Tandy, carves around the second gate

Whether the market is buoyant or more challenging, there is no substitute for networking with colleagues and clients. Mark Rigby Chief Executive Lambert Smith Hampton

Putting the rail to the test on the snowboard course

Lambert Smith Hampton / 11

Agenda / Issue One / Q2 2008 / Public Sector Advisory

Tony Comer (centre), County Property Officer at Hertfordshire County Council with Chris Parkes (left) and Steve Dunevein (right), Lambert Smith Hampton’s public sector specialists.

Making a difference As public-private partnerships within the local authority sector continue to flourish Agenda spoke to client partner Tony Comer, County Property Officer at Hertfordshire County Council (HCC) about what makes these alliances so viable. Words Sandy Townsend | Images Nathan Turner

ccording to Tony, working with

For Tony, wanting to make a difference to his

“The old style of dealing with Compulsory

private sector partners, such as LSH,

local community and improving the lives of

Purchase Orders (CPO) is a key example of the

enables shared best practice, and

local people is what drives him each day, a

effect that you can have on people’s lives as a

for local authorities, this helps make a real

common thread found among local authority

surveyor. I remember being quite young and

difference to communities.

property professionals.

having to walk into people’s homes and issue a CPO, offering just £3,000 for their house. To

“These partnerships are about delivering

“We are certainly not in it for the money!”

have to do that and see their faces. That was

added value by allowing the very best

he said.

very difficult.”

sector wants the best people and invests in

“The early days of working as a chartered

Property Titans

obtaining and developing these specialists.

surveyor in the north east of England really

With more than £300 billion worth of

I’m looking to buy-in this expertise to help

opened my eyes to the social dimensions of

property assets across the UK, local authorities

me deliver the best property strategies; these

property and its impact on the people involved

are collectively one of the largest property

partnerships offer incredible value and benefit

– both positive when handled in the right way

owners in the country.

for all involved.”

but also negative when not.

professionals into our business. The private

12 / Lambert Smith Hampton

Agenda / Issue One / Q2 2008 / Public Sector Advisory

However, according to Tony this presents an

Practice in Asset Management by CoreNet

“Building a relationship of trust is so

asset management challenge for the sector -

Global UK; the first public-private team to do

important in partnerships. In some instances

much of this capital cannot be easily realised.

so in the Award’s history.

over the past five years LSH would never have offered the advice it did if we did not have a

The issue is that around 90 percent of these assets are locked in operational use for service

“To enter and win awards is very important

relationship based on trust. It is important to

delivery to local communities - across a diverse

for HCC, not only for the morale of staff but

be innovative, and where appropriate take a

range of service streams and property types,

it is important to open yourselves up and be

risk but we would not have done that if we

from schools, libraries and social housing to

judged by others in your field. Transparency is

didn’t trust LSH. Likewise, LSH would not have

community and leisure centres, depots and

key in local authorities.

placed those ideas on the table if the team did not trust us to listen.”

town halls. Each of the differing uses have their own pressures and drivers, which local

“I can tell you that to beat the likes of

authority property professionals need to

Motorola to the CoreNet Award was a very

For Tony, from a more personal point-of

understand and address. In HCC’s case this

proud moment for us.”

view, great client service is achieved when he receives the right service delivery, for the right

applies to over 1,000 properties. Future Focus

cost, which is delivered in the right way.

Tony said: “The challenges and stresses for

Looking ahead, from Tony’s point-of-view, for

local authorities are to be more efficient and

commercial property professionals there are

“A partner, which predicts my needs and

better at what we do, and to work with

two significant agendas emerging, Corporate

therefore gives me an easy life and value,

our private sector partners to really make a

Social Responsibility (CSR) and client service.

delivers great client service.

difference through community leadership. “The growing CSR agenda in corporates

“It is also important for me to see my partner

“Knowing what is right for the place within

reads nicely across where local authorities

look after the people within their own

which we work and live is very important and

and the public sector have been for a

organisation well and give them praise.

the key for local authorities. Property has a

long time. Thinking about what we are

very important role to play in shaping our

doing to save the planet through our own

“Most importantly I want to feel that my

communities and we need to ensure we have

property portfolios and passing on to

service partner wants to give me the best client

the right strategies in place to do this.”

future generations is very important. This

service possible. I of course know that you

is something that the private corporate

actually may have hundreds of other clients,

property sector is now also taking on board.

but by making us feel that our work is a priority

Award Winning

and important to you goes a long way!”

Delivering the right property asset management strategies is exactly what HCC

“When you look at Hertfordshire at least 80

and Tony’s team are committed to doing for

percent of our CO2 omissions are omitted by

For further information, please contact:

the people of Hertfordshire.

properties. Addressing and managing this is

Chris Parkes, Public Sector Advisory

what our asset management is all about.”

E: cparkes@lsh.co.uk T: +44 (0)1727 896 238

In 2006 HCC was recognised by its peers as leaders in local authority asset management,

Switching to the issue of client service, Tony

when it was awarded Beacon Council status

argues that great client service can only be

Steve Dunevein, Public Sector Advisory

for Asset Management. The same year HCC

delivered when you have a great supplier and

E: sdunevein@lsh.co.uk

and LSH were also awarded the ‘Corporate

a great client, working in partnership.

T: +44 (0)20 7198 2054

Real Estate Partner of the Year Award’ for Best

Working with private sector partners, such as LSH, enables shared best practice, and for local authorities, this helps us make a real difference to our communities. Tony Comer County Property Officer Hertfordshire County Council Lambert Smith Hampton / 13

Agenda / Issue One / Q2 2008 / City Spotlight

With the largest national network of any commercial property consultancy, no firm is better placed than LSH to provide an indepth view of markets and cities across the UK and Ireland. In this issue of Agenda, we resurrect the north v south competitive spirit and compare London and Manchester.

Manchester

anchester may not be a metropolis like London, but it doesn’t stop it being a better city! In terms of

size Manchester sits proudly as the second city with its international airport, catchment area of 7.3 million people and an estimated GDP similar to that of Sheffield, Leeds and Liverpool combined. Manchester’s universities attract approximately 30,000 students every year and the city has the largest student campus in Western Europe. The energetic, cosmopolitan nature of the city has attracted leading restaurateurs and retailers to the home of the world’s most supported football team. Manchester United Football Club is the world’s biggest sporting brand; Arsenal and Chelsea do not even come close! In Manchester we are proud of our sporting heritage and the city successfully hosted the Commonwealth Games in 2002. The legacy of the Games delivered a new home for Manchester City Football Club, the Manchester Velodrome, conferencing facilities and an international swimming pool. The Games raised Manchester’s profile and it is now the third most visited city in the UK. The Lambert Smith Hampton (LSH) office in Manchester is staffed with more than 100 people, occupying approximately 18,000 sq ft of accommodation. The office has recently welcomed a planning team of seven from Erinaceous, demonstrating our commitment to building business streams and strengthening our core capabilities.

Our office is conscious of its involvement in the local community. In the last 12 months we have had a number of key fundraising initiatives. This includes the Manchester 10k run where a team of 12 raised £2,925 for Fairbridge, a charity supporting under privileged children in Salford. Later in the year, the office raised over £2,500 for the Prince’s Trust by holding a silent auction of goods provided by key suppliers. Now in 2008 we are also helping to raise funds to support CLIC Sargent, LSH’s national charity partner. Market moves: Manchester city centre office market experienced another highly active year in 2007 with total take-up in the order of 1.1m sq ft. This was the second highest total on record and significantly higher than the previous year’s figure of 960,000 sq ft. There are now three recognised business locations with occupiers being able to choose from Spinningfields, Piccadilly or the traditional core. Manchester now has its first tower block, the Beetham Tower, built in 2006. It is the tallest residential building in Europe climbing 49 storeys and the structure dominates the impressive skyline of Manchester. Over the last 10 years we have seen more than 5,000 new apartments built, attracting an explosion of new restaurants, shops and vibrant nightlife. This residential development programme has begun to ease but there is sufficient economic growth within the region for Manchester to continue to grow. Manchester’s fame and strength is its trading and entrepreneurial spirit. This is still very much alive today and is what makes it such an exciting and invigorating place to work. LSH’s

Peter Skelton Head of Manchester E: pskelton@lsh.co.uk T: +44 (0)161 242 7005 Favourite local restaurants

Manchester office is proud of its continued

San Carlo

contribution to the City’s renaissance.

Best Italian restaurant outside Rome Chaophraya Sophisticated spices of Asia Sam’s Chop House Traditional mushy pea and steak pudding Favourite Manchester hotels Lowry Spot the footballers and rock stars City Inn Great cocktail bar Radisson Edwardian Exquisite service and location

14 / Lambert Smith Hampton

Agenda / Issue One / Q2 2008 / City Spotlight

London

of five London Borough estate management contracts for Ealing, Hammersmith and Fulham, Lambeth and Wandsworth are

further demonstration of our expertise and

example, the capital is the driver of national

tobuild our service offer for our clients. I’ll look

economic growth, powered by key service

forward to making more announcements as

industries. As an international financial centre,

the year progresses.

ondon is a wonderful city with a rich

commitment to opportunities in the public

history and it has a huge influence on

sector. There may be uncertainty in the

UK and global issues. Take finance for

markets but we believe this is the best time

the ebb and flow of London is intrinsically linked to the global economy. This is no more apparent than in times like these. The present liquidity crisis and its impact on the property cycle was first felt in the City and West End of London before the ripple effect nationwide. However, London is a resilient city. It has a mettle and character that has seen it through tough times. While Londoners and those within the commercial property market are more bearish than they were, they are constantly looking long term for growth, and London gives us that opportunity. There is no doubt that 2008 will be a tough

Guy Gregory Head of London E: ggregory@lsh.co.uk T: +44 (0)20 7198 2198

year for London. Lambert Smith Hampton

Talking of London local government, the

research predicts take-up in Central London

election of Boris Johnson to Mayor will no

commercial property to fall 30 percent,

doubt alter the dynamics of the City and the

mirrored by a drop in the capital’s GDP

next four years will be very interesting for

growth to 0.6 percent, compared to 4.8

the changing face of London’s commercial

percent in 2007. However, come 2009 we are

property market. The Mayor recently told LSH

predicting London GDP growth to upswing to

that he is committed to boosting regeneration

an improved 2.1 percent. While the health of

in the suburbs and aiming to simplify the

the financial services sector will no doubt play

planning process. This can only present

a crucial part in the Central London market

positive opportunities for developers, investors

over the next 2-3 years LSH expects 2009’s

and occupiers alike. In any case, the Mayor’s

upward movement in GDP to continue mid-

new powers to provide the right to veto or

to-long term.

push through major planning applications will quickly establish if Boris Johnson is truly

While the picture for 2008 is not good news, Favourite local restaurants

serious about tackling London’s development

take-up and demand are expected to settle at

and investment slow-down.

Langan’s

levels that are more reflective of a more stable

History and atmosphere

property cycle.

Locanda Locatelli

But, there is more to London than being a focal point for the UK politics and business,

In the interim LSH is taking the opportunity

including commercial property. There is much

Mosimann’s

to build our teams and recruit high calibre

to love about our cosmopolitan and multi-

Exquisite food

individuals. Our London office continues to

cultural City. Its history and architecture are

grow from strength to strength, based on a

awe inspiring.

Intimate atmosphere

Favourite London hotels The Hilton Spectacular views The Dorchester Stunning décor The Westbury On the doorstep of London’s West End

diverse service delivery with an emphasis on consultancy activity and national instructions;

As to the exact outlook for the future of

combining to establish solid foundations for

London, that will always be hard to predict.

our business, and ultimately for our clients.

London is dynamic therefore it will continue to surprise, but that is what makes it is such a

I was pleased in May to welcome 12 new staff

great place to live and work.

to our 260 strong London team. The arrival

Lambert Smith Hampton / 15

Agenda / Issue One / Q2 2008 / National Office Report

Northampton and Cambridge top the class New office and employment hot spots Index ranks UK’s leading locations

orthampton and Cambridge are the

property rents are the biggest cost for any

UK’s number one office hot spots

business, this Index can help business leaders

and the best business locations in

decide where best to locate – particularly

the country, according to a new nationwide

as reducing overheads is becoming key to

survey of 28 leading towns and cities. The

competitiveness, and in some cases survival, in

combination of a highly skilled workforce

today’s tough and tightening market.“

and good quality affordable office space has propelled the city into pole position. The new location Index created by Lambert

The LSH Location Index shows: •

top the league due to their availability

Smith Hampton ranks performance based

of space, competitive property costs and

on three labour indicators – skills, costs and recruitment – and two property indicators – office rents and availability. The Index is the

skilled workforce. •

office markets in this way and it is designed to

Reducing overheads is becoming key to competitiveness, and in some cases survival, in today’s tough and tightening market. Dr Arezou Said Research Lambert Smith Hampton

Reading, Bristol and Newcastle rank as average centres – although Newcastle

first nationwide survey to link the labour and help business leaders decide where to locate.

Northampton, Cambridge and Newport

Market Summaries The office market is slowing and we anticipate an increase in vacancy rates. The critical factor over the next 18 months will be occupier demand. Central London is expected to be hit hardest, but we are expecting positive growth, albeit much lower than in the past for the rest of the UK, based on current evidence.

•

scores particularly well in terms of both

Central London

rental and labour costs.

Take-up and rents have been through a

Glasgow and Birmingham prop up the

period of significant growth. With the current

table. Despite high scores on labour

economic climate beginning to impact,

costs, skills and ease of recruitment –

the City is likely to be hardest hit. We are

high rents and the shortage of good

predicting a 14 percent decline in rents this

quality office space drag them down in

year and a further 6 percent decline next year

the Index.

to £55 per sq ft before the market stabilises and recovers. In the West End, whilst Mayfair/

The LSH Location Index will be published

St James’ is likely to see a fall in rental values,

annually as part of the firm’s market

the lower levels of development and relatively

intelligence and research schedule.

tight market should help to keep rental values at their current level in other sub-markets in the next two years.

LSH Location Performance Index (excluding London) 130

The league table shows that British employers are struggling to fill staff vacancies in some locations despite the slowdown in the

110

economy. High rents are also affecting the competitiveness of some of the UK’s cities. Northampton, Cambridge and Newport top 90

the league because of their right mix between the cost and availability of labour and office space. Birmingham and Glasgow are bottom of the table because recent demand for

accommodation has pushed up rents and reduced the amount of office space available. 50

Dr Arezou Said, LSH Research, said: “This is the first survey to join the dots between the job market and the challenges of finding

Average = 100

and financing an office. Since wages and Source: LSH Research

16 / Lambert Smith Hampton

Agenda / Issue One / Q2 2008 / National Office Report

South East

Wales

although additional speculative development

In Milton Keynes the lack of good-quality city

Cardiff ended 2007 on a high with take-up

is required to stimulate further growth.

centre stock means new office developments

exceeding long-term averages and setting

are let prior to completion. While demand is

new record rents. While development activity

North West

stable throughout the Thames Valley, supply

and the amount of space in the pipeline is

Manchester city centre take-up exceeded

of top-quality space is at risk of limiting

likely to provide the city with a significant

1.1m sq ft in 2007. Spinningfields continues

growth, except in Maidenhead, where there is

amount of new space, pent-up demand and

to be the premier business location but there

an abundance of new and under construction

the potential for a number of large space

have also been several significant deals on

space. In neighbouring centres, the lack of

occupiers to upgrade from existing premises

secondhand space. Supply of Grade A space

Grade A space is driving secondary take-

should provide comfort to speculative

is improving with multiple large schemes

up and substantial refurbishment projects.

developers. Cardiff could suffer if the latest

coming to market over the next year, but

Guildford also has a strong office market

credit crunch results in a significant downturn

there are concerns regarding over-supply. The

with take-up levels constrained by limited

in occupier demand. Newport and Swansea

increase in the supply of new space is forecast

availability. Guildford is forecast to see one of

have benefited from good levels of activity

to result in rents remaining static on new and

the highest rates of rental growth this year.

in 2007, with SA1 and out of town business

second-hand properties.

Along the South Coast, there is a good and

parks proving attractive. Favourable demand

balanced market with healthy take-up, a good

and rising rents are forecast to encourage

North East

supply of new and refurbished space and a

further development and investment.

The Newcastle office market has been constrained by a lack of Grade A space.

substantial development pipeline. West Midlands

The market has seen good levels of take-

East

Birmingham had a good year in 2007

up. Rental values in the past few years have

The Cambridge office market is focused out

when almost 700,000 sq ft was let. Since

grown from a low of £15.00 per sq ft a few

of town due to a lack of space and sites in

the beginning of 2008, take-up has been

years ago to stand currently at £20.00 per sq

the city centre, although developments in the

reasonably strong. Supply, particularly of new

ft and we expect to see modest growth this

pipeline will improve supply. Peterborough

space, is good, with a number of schemes in

year. The out of town market has in excess of

will benefit from its significant regeneration

the pipeline. Given the steady and balanced

4m sq ft in the pipeline, which will add to the

programme. Take-up was good for the year

supply of office space coming to market we

supply of accommodation.

and demand has continued to rise, although

believe that prime rents will remain at £32.50

the lack of speculatively built space continues

per sq ft throughout the year.

Scotland Edinburgh and Glasgow have attracted

to constrain the market. The Chelmsford office market continues to be healthy with

East Midlands

significant activity. Glasgow, in particular,

little competition from its neighbours and

Northampton had strong take-up in 2007,

has seen take-up levels increasing above the

excellent connections to Central London.

slowing towards the end of the year and into

historic average in the past two years. The

Luton has seen good take-up of recent

2008. New developments completed mean

strength of demand has led to a shortage of

schemes both in and out of town. Major

that there is a lot of new space available, but

space in the city centre. There is a substantial

infrastructure improvements will benefit the

still not enough to satisfy demand. Demand

development pipeline in both cities, with

market and encourage new development

in Nottingham is strong but with little Grade

Glasgow particularly likely to see more than

in Luton and Dunstable. St Albans has seen

A space coming to market and a limited

800,000 sq ft. However, it is unlikely that

rising interest in its office sector with good

pipeline, Nottingham is in danger of losing

the market will see a substantial increase

take-up driving vacancy rates down. Watford

occupiers to nearby Leicester. There is a

in the amount of space coming on the

is also seeing an improvement in take-up

good supply of Grade A space, allowing the

market before mid 2009. There is likely to

although greater incentives are driving this.

city to soak up some of the demand from

be sufficient demand in the medium term to

Nottingham’s tight supply.

absorb the space in the pipeline.

Bristol experienced a bumper year in 2007

Yorkshire and Humberside

For further information, please contact:

with over 1.3m sq ft let. This left supply a little

The region has experienced strong and

Arezou Said, Research

short with availability of Grade A space just

improving performance over the past few

E: asaid@lsh.co.uk

1.6 percent of total office floorspace. Second-

years. Leeds is being constrained by lack of

T: +44 (0)20 7198 2060

hand space has been letting well due to the

development sites in the city centre, although

above shortage. Pipeline developments are

the definition of “city centre” is being

Tony Fisher, Office Agency

expected to bring 600,000 sq ft of new space

expanded with all the major developments

E: tfisher@lsh.co.uk

to the market over this year. Provided demand

currently under construction outside the

T: +44 (0)20 7198 2250

remains healthy in the coming months, this

traditional office quarter. The city is expected

space is likely to be taken up quickly.

to see rental growth provided demand

South West

holds up. Sheffield is benefiting from a stable balance between supply and demand

Visit www.lsh.co.uk to access our archive of economic and property research reports. Lambert Smith Hampton / 17

Agenda / Issue One / Q2 2008 / Lambert Smith Hampton Redgrave Pinsent Golf Classic

Pictured, left: Kris Akabusi, former Olympic, World, European and Commonwealth Champion warms up his swing. Top: GB Ski Champion Konrad Bartelski and ambassador of the LSH Ski Challenge goes for the long shot watched on by Yellâ&#x20AC;&#x2122;s Head of Property, Simon Taylor. Above: Lambert Smith Hamptonâ&#x20AC;&#x2122;s Guy Gregory (left) with John Francome.

18 / Lambert Smith Hampton

Agenda / Issue One / Q2 2008 / Lambert Smith Hampton Redgrave Pinsent Golf Classic

A swinging success The LSH Redgrave Pinsent Golf Classic Entrants in the star-studded Lambert Smith Hampton Redgrave Pinsent Golf Classic reported fine conditions and stiff competition as players and celebrities vied to win the coveted trophy and raise money for children’s charity SPARKS (Sport Aiding Medical Research for Kids).

he LSH Redgrave Pinsent Classic Golf Day, fast becoming one of the highlights of the property calendar,

was hosted at the Harleyford Golf Club, near Marlow, on Wednesday 21 May. Celebrities joined LSH staff and clients for some serious but good-humoured competition, followed by a prize-giving and charity auction dinner. SPARKS – LSH’s partner for the day – lent its support and LSH managed to raise £17,000 for the children’s charity. Since its launch in 2006, the LSH Golf Day has raised more than £60,000 to help SPARKS’ work in researching new treatments for childhood cancers. Olympic rowing legends Sir Steve Redgrave and Sir Matthew Pinsent were joined by a host of celebrities, including three-time Olympic medallist Kriss Akabusi, GB downhill skiing star Konrad Bartelski, football’s Hans Segers, and tough-guy actor Dennis Waterman. Speaking after the event, Guy Gregory, Head

For further information, please contact:

The winning team, pictured above with Sir

of London, said: “The event raises money

Guy Gregory, Head of London

Matthew Pinsent, Sir Steve Redgrave and LSH

to help fund SPARKS’ vital research into

E: ggregory@lsh.co.uk

Chief Executive Mark Rigby comprised of:

conditions that affect babies and children.

T: +44 (0)20 7198 2198

Brendan Maher (second from left)

That work will reduce the risks for babies

English, Welsh & Scottish Railway

born prematurely, and assist in combating

Katherine Simpson, Events

David Bryett (third from left)

conditions such as spina bifida and childhood

E: ksimpson@lsh.co.uk

English, Welsh & Scottish Railway

cancers. Our charity Golf Day gives us and our

T: +44 (0)20 7198 2072

Mike Tye (third from right)

clients a chance to give something back.”

Lambert Smith Hampton

Lambert Smith Hampton / 19

Agenda / Issue One / Q2 2008 / Empty Property Rates

Survey reveals fears as rating legislation bites The Government’s revised Empty Property Rates (EPR) legislation will drive down commercial property values, disincentivise development and reduce the availability of property in the marketplace.

hese warnings come from a survey of

Richard Wackett, LSH Rating, said: “There’s

100 developers, investors and occupiers

a very real risk that this legislation will result

of commercial property by Lambert

in more buildings being left unfinished so

Smith Hampton.

that their owners can avoid paying the tax, with even workable buildings being

The Government argues that the reforms,

demolished simply to avoid void periods.

which came into effect on 1 April, will bring

People will do this to help their businesses to

empty buildings back into profitable use.

be more competitive – and it’s hard to blame

Widely believed to be little more than a £1

them for that. Legislation is supposed to

billion tax grab by the Chancellor, the survey

provide incentives for effective development

suggested that the new legislation will cause

and business growth, not poorly planned

significant damage at a time when the sector

obstacles. There has to be a better way.”

is under intense pressure. The LSH Empty Rates Survey Report March 2008 revealed: •

More than 80 percent of respondents said the EPR changes will have a detrimental effect on town centre regeneration.

•

70 percent expect capital values to drop; while 53 percent believe rents will fall – good for occupiers in the short term but resulting in longer term rental rises due to the emergence of a two-tier market thanks to the EPR changes.

•

Contrary to the Government’s belief, 80 percent of respondents disagreed that the legislation will help to bring more properties to the market.

•

More than 50 percent of respondents will review their property portfolios, either by slowing their development programme, selling properties or demolishing buildings that are unattractive to tenants and buyers.

•

The industrial sector of the commercial property market will be hardest hit.

20 / Lambert Smith Hampton

It’s not all doom and gloom however. Loopholes and exceptions within the new legislation mean that there are various actions companies can take to legally mitigate their liabilities.

Scenario One Developing New Warehousing A developer is in the process of constructing an estate of distribution warehouses with a total floor area of 100,000 sq m. The scheme is due to be completed in January 2009 and a letting period of 18 months is expected. The developer will face a possible annual empty liability in the order of £20.79 per sq m or £1.93 per sq ft. This would create an annual liability of £2,000,000. The developer would be well advised to consider the following actions as part of a marketing/rate reduction strategy: 1. Offering terms to a tenant which share the rate liability for an initial period through, for example, a rent free alternative, a discounted initial rent or capital contribution. 2. The local council is entitled to issue a “completion notice for rating purposes” as soon as it believes the estate or parts of it are capable of completion within three

LSH has teams of specialists working closely

months. Rate liability will commence six

with their clients in order to create and

months after the completion notice expires.

implement a tailored strategy for each

The developer should consider appealing

property portfolio. Here are some examples of

against the completion notice on the basis

how we can help alleviate your future empty

that the property could not be properly

property rates liability:

completed within the three month period and/or appealing any assessment issued by the valuation officer.

Agenda / Issue One / Q2 2008 / Empty Property Rates

3. It is possible that the valuation officer may decide, on his own initiative, to assess the property when the estate approaches completion. Under these circumstances it is often possible to appeal against the assessment on the grounds that the property is incapable of occupation thus reducing or eliminating the rate liability. 4. If only part of the property is in use, then an application for discretionary relief should be considered. Benefits Early dialogue with the Valuation Office Agency and local council will enable the ratepayer to manage their liabilities, and budget appropriately during the construction and marketing phase.

Legislation is supposed to provide incentives for effective development and business growth, not poorly planned obstacles. There has to be a better way.

Scenario Two

Benefits

Speculative Office Development

Consideration of the exemptions from rates

A speculative office development has recently

appeals process could mitigate liability during

been completed and despite attempts to pre-let the space, the building remains vacant with no serious occupational interest. The institutional owner was paying empty rates at 50 percent of the full amount before 1st April

pending occupation and proper use of the any protracted marketing campaign. These scenarios serve only as examples of the strategies LSH can develop to reduce our clientsâ&#x20AC;&#x2122; liability for empty property rates.

and his liability for rates has now doubled.

Clients should place fundamental importance

The developer should consider the following

opportunity, as the likelihood of mitigated

strategy in order to mitigate his liability: 1. Granting more flexible letting terms and/ or the possibility of a letting to a tenant with partial or complete exemption from rates. A charity is only liable for 20 percent of the full

on seeking professional advice at the earliest rates will often be lost once the property has been vacated. For further information, please contact: Richard Wackett, Rating E: rwackett@lsh.co.uk

rate liability.

T: +44 (0)113 2976 246

2. He should consider appealing against the

Lee Mogridge, Transactional

rating assessment in an attempt to reduce the liability.

E: lmogridge@lsh.co.uk T: +44 (0)29 2043 4691

3. If the valuation officer has assessed the property in the absence of a completion notice being served and the offices are not fully fitted or are only finished to a shell and core state, then there will be scope for arguing that the offices have not been completed to the standard commonly required by office occupiers and should not be assessed until the completion of this work.

Richard Wackett Rating Lambert Smith Hampton

Lambert Smith Hampton / 21

Agenda / Issue One / Q2 2008 / The Environment

The environment: property’s responsibility As the effect climate change is having on our planet pushes up the corporate and social agenda, the demand for an environmentally-responsible approach to commercial property development is becoming a more prevalent issue for occupiers and developers alike. Words Anna Silkstone

ost, if not all, organisations

Commerce (OGC). English Partnerships

the scheme so highly that LSH’s Luton office is

have implemented a Corporate

require that all new developments involving

planning to relocate to the green development

Social Responsibility (CSR) plan.

its land, receive a BREEAM rating of ‘very

this summer.

CSR enables businesses to demonstrate to

good’ or ‘excellent’.

employees, suppliers, customers, shareholders

Head of LSH’s office in Luton, Lloyd Spencer,

and the wider community that they care about

For over a decade BREEAM has been used

explained: “The Village is a campus-style office

the environment and the management of their

to assess the environmental performance

development that has embraced sustainability

carbon footprint.

of new and existing buildings and is widely

at all levels of its design, construction and

accepted as a benchmark for measuring

landscaping. It has been awarded the highest

environmental performance.

environmental BREEAM rating, ‘excellent’,

The facts The 1990s were the warmest 10 years of the

while also being awarded the 2007 OAS/

last millennium. The unfortunate fact is that

Andrew Delaney, LSH Urban Regeneration,

Property Week Office Development Award for

UK and Ireland industry, including commercial

said: “The rising environmental agenda

‘Sustainable Achievement of The Year’.”

property, consumes up to a quarter of all of

and legislative pressures are seeing building

the energy produced. This means the action,

design and construction standards become

“As the effect climate change is having

or lack of, taken by businesses, will have

increasingly important. The planning system

on our planet becomes more evident, the

significant repercussions for the future.

is placing greater emphasis on excellence

opportunity to occupy a sustainable office

and is looking for evidence of the use of

development seemed the natural solution

What is being demanded of the

renewable materials in construction and a

for LSH. This clearly demonstrates LSH’s

commercial property market?

low carbon footprint.”

commitment to sustainable development.”

commercial property to respond to the

What can be done?

In order to maximise a building’s full

environmental agenda, but legislation and

Martin Treacy, LSH Building Consultancy,

sustainability potential, it is essential that

building regulations have been implemented

explained: “The green agenda will lead to

a strategy detailing the environmental and

to ensure our carbon footprint is addressed.

occupiers demanding more energy efficient

sustainability aspirations for the scheme is

On the 6 April 2006 revisions to Part L of the

buildings. As such, landlords and developers

devised at the outset. Kevin Gleeson, LSH

Building Regulations came into force, further

alike will need to rise to the challenge by

Planning, suggests four top tips for planning

increasing the energy efficiency standards

investing substantial capital in constructing

a sustainable development or refurbishing an

required by buildings. The regulations, which

more sustainable buildings or upgrading

existing building:

are designed to drastically cut the carbon

property which is no longer attractive to the

emissions of buildings, apply to all new

market and past its sell by date.”

Not only is pressure being placed on

buildings and existing buildings which have work carried out.

Design for climate change: Buildings and infrastructure should be designed for the

According to Martin, such an approach was

climate change they will experience over their

taken by the Department for Environment,

lifetime. For instance, buildings should be

By the end of the year, all commercial

Food and Rural Affairs when it refurbished its

able to manage excessive rainfall, through

properties will be required to have an Energy

London offices at Nobel House in 2005.

sustainable drainage systems.

One example of an environmentally

Be energy efficient: As part of the design

Performance Certificate detailing on an A to G scale how energy efficient it is.

responsible property development is Easter

process, energy efficiency should be maximised

To add to this BREEAM (Building Research

Group’s office scheme, known as The Village,

by installing mechanical and electrical systems

Establishment Environmental Assessment

at Butterfield Business and Technology Park

to reduce energy consumption such as passive

Method) building assessments are required

in Luton.

solar design, using materials with low life-cycle

by various regulatory and government

impacts, recycled materials or materials from

organisations. These include English

LSH’s Lloyd Spencer, who was instructed by the

sustainable sources, solar water heating,

Partnerships and the Office of Government

Easter Group to market The Village, regards

heat pumps and condensing boilers. Carbon

22 / Lambert Smith Hampton

Agenda / Issue One / Q2 2008 / The Environment

emissions should also be reduced through the use of renewable energy technologies. Through the introduction of increased metering and monitoring, companies are able to benchmark energy consumption and set targets for further reduction. Optimise location: The development should optimise the capacity of the site, while reusing previously developed land. The density of a development should be maximised based on the local context, public transport capacity and access to complementary services. Consider the siteâ&#x20AC;&#x2122;s micro-climate: The position of a building and its relationship with adjoining buildings affects its ability to take account of its micro-climatic conditions. The choice of materials, nearby vegetation and appropriate elevation treatment can all help to minimise dependence on artificial cooling, heating and lighting. What next? A sustainable future: A greater public awareness of climate change, combined with rising energy prices, legislation, building regulations, customer and employee attitudes and a businessâ&#x20AC;&#x2122;s own desire to be seen as implementing an ethical approach to the environment, will result in an increased demand for sustainable property development. The stricter regulations that are currently in place will gradually become more stringent and the advice to developers, funds and landlords is to embrace these principles now and construct more sustainable buildings, while occupiers need to appreciate the importance of understanding and embracing the need for sustainable development. For further information, please contact: Lloyd Spencer, Industrial E: lspencer@lsh.co.uk T: +44 (0)1582 878 282 Andrew Delaney, Urban Regeneration E: adelaney@lsh.co.uk T: +44 (0)161 242 8028 Martin Treacy, Building Consultancy E: mtreacy@lsh.co.uk T: +44 (0)20 7198 2140 Kevin Gleeson, Planning E: kgleeson@lsh.co.uk T: +44 (0)20 7198 2292 Easter Group has instructed LSH to market space on their award winning Butterfields Business and Technology Park in Luton

Lambert Smith Hampton / 23

Agenda / Issue One / Q2 2008 / Energy Efficiencies

Sustainability comes cheaper by the dozen The Government is striving to make commercial properties carbon zero by 2020 and has committed to tough green targets by using a combination of on-site, near-site and off-site renewable energy in all new non-domestic buildings. Words Victoria Walker

his follows hot on the heels of the

partnership has been able to buy in bulk on

in a tight market, investors are seeking ways

Government’s Code for Sustainable

a larger market in order to pass on reduced

to maximise the efficiency of their buildings.

Homes, but only one percent of the

costs to the client. Prices for oil, gas and power have continued

UK’s commercial properties are new-build and retrofitting will pose challenges for

As part of the three-year contract, Power

to rocket and this has had a major impact on

property owners.

Efficiency will manage risk by procuring

the bottom line of UK businesses. As a result,

energy on the wholesale market on behalf of

traditional annual fixed price energy contracts

The Government’s initiatives include

LSH’s portfolio of nationwide clients. It has

are set to become a thing of the past.

performance incentives featuring penalties

already successfully reduced annual energy

and measures that will ensure occupiers do

bills by more than 20 percent and is on target

Savvy companies have taken advantage of

their bit, such as the use of green leases.

to save in the region of £400,000 in 2008/9.

the competition between suppliers since

Lambert Smith Hampton’s (LSH) view is that

Julian Healey, LSH Property Management,

of the century, but in today’s world is a

a coordinated approach is needed, and

said: “We are using a strategy that will not

risk-managed, energy procurement strategy

that financial incentives to reduce energy

only reduce our clients’ energy bills by bulk-

required to reduce a company’s vulnerability

consumption will be as important as legislation.

buying power on their behalf, but will also

to high and volatile energy prices?

the UK gas market opened up at the turn

help to reduce the carbon footprint of their In a bid to help its clients reduce both the

property portfolios through the ability to

Flexible contracts can be negotiated between

energy consumption and the running costs

purchase green sources of power.

purchasers and suppliers, but this needs an expert to closely follow the market and

of the property portfolio, LSH has agreed a partnership with energy management

LSH’s deal for its clients comes as the pressure

to advise when to buy from global energy

consultancy, Power Efficiency, on behalf of

begins to mount for businesses of all sizes to

markets. This can protect businesses when the

its property management clients. Through

prove their environmental credentials and,

market is rising and also unlock and relock to

a number of procurement initiatives, the

driven by a need to reduce operational costs

take advantage of falling prices.

24 / Lambert Smith Hampton

Agenda / Issue One / Q2 2008 / Energy Efficiencies

We are using a strategy that will not only reduce our clients’ energy bills by bulkbuying power on their behalf, but will also help to reduce the carbon footprint of their property portfolios through the ability to purchase green sources of power.

Traditionally, companies have purchased

in the wholesale market so that we can make

energy annually on a fixed price contract.

savings during favourable market conditions.”

Power Efficiency’s risk management strategy now enables the purchase of energy directly

Many companies, especially those with

from the wholesale market in seasonal blocks.

shareholders to satisfy, are also switching to green energy, but renewable power

The flexible nature of LSH’s agreement

sources remain limited and companies are

with Power Efficiency means that when a

now looking for additional methods of

building is sold, it can be released from the

reducing their carbon footprint. This contract

contract without penalties. New properties

enables LSH to purchase green energy for its

and property managed clients can also join

nationwide network of offices, but also for its

the scheme at any time during the three-year

clients around the country.

contract period. For more information, please contact: Mark Callaway of Power Efficiency said: “This

Julian Healey, Property Management

strategy enables small and large companies to

E: jhealey@lsh.co.uk

benefit from cost reductions through the bulk-

T: +44 (0)115 950 1414

buying of energy. Guy Gregory, Head of London “We have two key objectives as part of this risk

E: ggregory@lsh.co.uk

management strategy. The first is to set a cap

T: +44 (0)20 7198 2198

on energy costs to allow for budgeting and the second is to exploit the opportunities offered

Julian Healey Property Management Lambert Smith Hampton

Lambert Smith Hampton / 25

Agenda / Issue One / Q2 2008 / Corporate Real Estate

Yell relocates its UK head office Lambert Smith Hampton recognises that property frequently represents the second highest cost to any business, after its people, and so requires effective management and careful planning. Words Laura Scott

ur surveyors are able to take an

“We have been working with LSH for over two

overview of geographical and

years and chose LSH as our property partner

industry trends, using innovative

because of its indepth knowledge of the

methods such as GIS Mapping, to provide

Reading and wider property markets. Yell’s main

clients with the best available property

consideration is its people. We needed a partner

opportunities and the cost and business

that wouldn’t conduct our business in public

benefits of each one.

until we had something to go public with. This was particularly important at the beginning of

Furthermore, we understand that for many

the project; we needed to get the groundwork

businesses, the issue of trust is paramount. We

done without unsettling our team.

conduct our services with the utmost discretion, providing strategic, market-facing advice.

“More specifically, space, design, location and environmental credentials were our top

LSH’s experience with major national

priorities when it came to relocating our HQ.

companies such as Siemens, BT and AXA

LSH acknowledged these points from the

led international directories business, Yell, to

outset and, throughout the project, has been

choose LSH to deliver the relocation of their

very much part of our team.

new UK head office. “The consultation process led us to consider The largest office acquisition in the Thames

a number of different options, both in

Valley for six years, LSH has recently

and out of town. One Reading Central’s

completed the pre-let of 153,500 sq ft at

proximity to transport links, high specification

One Reading Central for Yell’s new offices,

design, flexibility for growth, and strong

occupying eight storeys at the landmark office

environmental credentials ultimately drove

building currently under construction.

our decision. We were delighted with the terms achieved; they were very advantageous

Simon Taylor, Head of Property at Yell, talks

to our business.

about the move. “Around 1,350 Yell employees are to move “Yell has a near 25-year history in Reading

into One Reading Central in summer 2010,

town centre and with our lease on our Queens

in a relocation from two existing offices in

Walk headquarters coming to an end we

Reading. Around 50 employees currently

needed a new home that would not only serve

based at premises in Slough will also make

as a single head office, but provide our people

the move. Since communicating news of the

with the very best of office environments.

relocation to the business we haven’t received a single piece of negative feedback, so we know we have made the right decision.”

26 / Lambert Smith Hampton

Agenda / Issue One / Q2 2008 / Corporate Real Estate

Proximity to transport links, high specification design, flexibility for growth, and strong environmental credentials ultimately drove our decision. We were delighted with the terms achieved; they were very advantageous to our business. Simon Taylor Head of Property Yell

How we did it GIS mapping In order to support Yell’s decision-making process, LSH’s Research Department undertook GIS Mapping analysis at the start of the project. This collates staff postcode information of all those to be affected by the relocation, and compared employees’ travel-to-work times against each property under consideration. The results showed that Reading in town and Reading out of town properties could be considered equally seriously, as the immediate impact on staff

LSH also helped to arrange an extension of

Dilapidations

Yell’s lease on its current HQ at Queens Walk

LSH Building Consultancy conducted a

in order that it coincides with the move to

dilapidations survey on both of Yell’s existing

One Reading Central in summer 2010.

properties in Reading, thereby identifying the likely repair and redecoration costs associated

One Reading Central was selected as the

with moving. In turn, Yell was able to factor

preferred property not only because of its

these costs into the overall relocation budget.

central location, proximity to the main rail station and high specification design, but

Looking ahead - rating

because it offers Yell the flexibility to expand

Having already arranged an extension of Yell’s

on the development or indeed sub-let space

lease at Queens Walk (75,000 sq ft), LSH

should the need arise.

is now appointed to minimise any onerous liabilities on two floors at Bridge Street

proved to be neutral.

Corporate social responsibility (CSR)

Plaza (50,000 sq ft). LSH’s Rating Division is

LSH’s commitment to CSR, together with

also now appointed by Yell to deliver rating

Office agency

Yell’s strong track record on corporate

services nationally.

LSH’s National Office Agency conducted an extensive market search for relocation options on behalf of Yell. This search was conducted confidentially, on account of market insight already held by LSH, and considered both in town and out of town properties given that there would be no negative impact on staff.

responsibility, meant that One Reading Central was also short-listed on account of its

For further information, please contact:

environmental credentials. The building, which

Nick Coote, Office Agency

will incorporate renewable energy systems

E: ncoote@lsh.co.uk

to reduce its carbon impact, has a design

T: +44 (0)118 959 8855

target to attain a BREEAM (British Research Establishments Environmental Assessment

Paul Nash, Rating

Method) rating of ‘very good’.

E: pnash@lsh.co.uk T: +44 (0)20 7198 2150

Lambert Smith Hampton / 27

Agenda / Issue One / Q2 2008 / Flashback

LSH may not have won for over a decade – but it’s only a matter of time… Mark Rigby Chief Executive Lambert Smith Hampton

28 / Lambert Smith Hampton

Agenda / Issue One / Q2 2008 / Flashback

Agenda Flashback Mark Rigby looks back at LSH’s maiden victory in the Annual Surveyors’ Rugby Sevens

he year Lambert Smith Hampton played DTZ in the final of the Rugby Sevens was truly unforgettable for me. Having

never won the tournament before, we were delighted to have even reached the final. In 1995, we had one of our strongest teams ever, with Guy Gregory and Lawrence Dallaglio (still a gap-year student from Kingston then!) both playing for London Wasps, and I had very recently retired from the game. The competition was fierce on the day with plenty of healthy banter between us and the DTZ boys, intensified by the fact that Mike Friday, fellow Wasps player at the time, was on the opposition team. We started atrociously and were 21-0 down after only five minutes of play – our prospects were looking grim. However, encouraged by our desperate desire not to be beaten by both a rival company and fellow club player, along with the commentator’s cries of “Come on LSH, make a game of it!” resounding in our ears, we managed to claw our way back,

Pictured: Guy Gregory, third from left; Lawrence Dallaglio, third from right and LSH’s Mark Rigby on the far right celebrate their maiden victory.

eventually winning 28-21. We were absolutely thrilled to have won the Sevens for the first time ever, with raucous partying going on late into the night. Although LSH has never won since, we know that one team player - Lawrence Dallaglio - was to go on to accomplish much greater things! The Rugby Sevens is one of the highlights of the property calendar, it’s a great social event and the healthy competition is always enjoyed by all. LSH may not have won for over a decade – but it’s only a matter of time…

Lambert Smith Hampton / 29

Our National Office Network Birmingham Tel: +44 (0)121 236 2066

Maidenhead Tel: +44 (0)1628 676001

Reading Tel: +44 (0)118 959 8855

Bristol Tel: +44 (0)117 926 6666

Manchester Tel: +44 (0)161 228 6411

St Albans Tel: +44 (0)1727 834234

Cambridge Tel: +44 (0)1223 276336

Milton Keynes Tel: +44 (0)1908 604630

Sheffield Tel: +44 (0)114 275 3752

Cardiff Tel: +44 (0)29 2049 0499

Newcastle upon Tyne Tel: +44 (0)191 261 1300

Southampton Tel: +44 (0)23 8033 0041

Chelmsford Tel: +44 (0)1245 215521

Northampton Tel: +44 (0)1604 662550

Swansea Tel: +44 (0)1792 702800

Dublin Tel: +353 (0)1 676 0331 www.lsh.ie

Northampton Building Consultancy Tel: +44 (0)1604 664366

Edinburgh Tel: +44 (0)131 226 0333

Nottingham Tel: +44 (0)115 950 1414

Fareham Tel: +44 (0)1489 579579

Oxford Tel: +44 (0)1865 200244

Glasgow Tel: +44 (0)141 226 6777

Peterborough Tel: +44 (0)1733 563921

Guildford Tel: +44 (0)1483 538181 Leeds Tel: +44 (0)113 245 9393 Leicester Tel: +44 (0)116 255 2694 London Tel: +44 (0)20 7198 2000 Luton Tel: +44 (0)1582 450444

National Property Advisers of the Year 2008