The Subplot | Crewe’s too hot to handle, ducal ambition, HS2 buffet

Welcome to The Subplot, your regular slice of commentary on the North West business and property market from Place North West’s analysis editor, David Thame.

THIS WEEK

• Too darn hot: what happens when an office market boils over? We are about to find out in Crewe
• Elevator pitch: your weekly rundown of who and what is going up, and who is heading the other way

TOO DARN HOT

What happens when demand for new offices has nowhere to go?

The answer is: we’re about to find out in Crewe, as HS2-related demand kicks in.

Radius Payment Solutions is about to get a new Crewe office. The super-relaxed 41,000 sq ft scheme includes a coffee bar, pizzeria, Star Wars-themed sky bar, a yoga area and lots of outdoor space, all due for completion by summer next year. It sounds like a dream, but the Caddick Construction project arrives in a Crewe office market that is anything but.

This town is full

The trouble is that Crewe and Nantwich’s office market is full – over full – and getting fuller. And whilst demand bulges, supply is as tight as it gets. At the 67-acre Crewe Business Park the vacancy rate is said to be 3%, which is basically nothing. The prospect of new development is strictly limited until well into next year, and even then won’t solve the problem (Subplot, 23 Feb 2021).

Round the Blok, again

The main hope is Blok’s 60,600 sq ft plans for the site north of Alvaston Roundabout at Middlewich Road, Nantwich. The first effort got knocked back in 2021 on the grounds that there was no demonstrable need for out-of-town offices, and that building on a plot behind a pub on a roundabout next to a business park was a step too far into open countryside.

If not here, where?

Blok and its team are now trying again. “There has been no significant office development over the past 10 years, the most recent being the office developed for Radius Payment Solutions on Crewe Business Park on a design-and-build basis, and there has not been any speculative office development of significance,” the company told planners.

Too late

The fallback is to ask (politely) why a pub was okay, and the Alvaston Business Park was okay, but not this scheme, with Blok’s team concluding that in this immediate vicinity the open countryside boat sailed long ago. Incidentally, Alvaston Business Park is reported to have raised concerns about the Blok development.

The alternatives

“There are allocated employment sites but they are at Basford, which occupiers do not see in the same way, or around Crewe railway station, which is not moving fast, and timing is the issue. Also, lots of land is being held back for HS2 contractors to use during construction,” explains Legat Owen’s Nantwich-based director Andy Butler, an advisor on the Blok scheme.

But we’ve thought of this

Last time Subplot looked at Crewe’s land supply issues Cheshire East Council said: “As set out in the council’s Local Plan Strategy, which was adopted in July 2017, Cheshire East’s Local Plan provides for an additional 380ha of employment development land for a range of employment uses, including offices. This includes 65ha of employment land at Crewe, creating opportunities for office development. In addition, an employment land component is included within a number of the strategic sites allocated at Crewe.”

Good news, bad news

The good news is that if land were to become available, developers could be assured of making some money. Rents of £17.50/sq ft would quickly surge to above £20 if speculative floorspace was on offer, says Butler. The bad news is that, in the meantime, sub-contractors looking for office space thanks to the mighty HS2 building contract have the choice of waiting for a sub-let or looking elsewhere. Asking what happens if demand pressure continues to build, but supply goes nowhere, Butler confesses he has no idea.

ELEVATOR PITCH

Going up, or going down? This week’s movers

Grosvenor, the ducal property empire, is occupying the upward moving lift like it owns it – which is fair, since it owns a lot of things. Going down, however, are some of the more ambitious asks from HS2.

Grosvenor’s rebalance

Grosvenor, the Duke of Westminster’s property empire, has bought Ardstone Capital’s 73,000 sq ft Ship Canal House, King Street, Manchester. Ardstone carried away a £5m profit on the sale (plus the rental income over eight years), and Grosvenor gets another trophy in its expanding out-of-Belgravia-and-Mayfair office portfolio. Grosvenor was late to the regional office game, indeed to any offices outside London W1, but in August 2021 announced a £300m budget to put this right.

The group has bought in Glasgow, Birmingham, Leeds and repeatedly in Manchester where it snapped up the 80,000 sq ft Hive, and 67,000 sq ft Canada House. A back-of-the-envelope calculation suggests about £80m has been deployed in Manchester, with more understood to be in prospect. Yield figures haven’t been published by Grosvenor, which means we’re squinting at these deals, but presumably the £20m-£30m lot size doesn’t cause the business much anxiety and provides it with the comfort that owning a slice of Manchester confers in these uncertain times. Other fancy-free London-focused investors are watching with keen interest.

The all-you-can-eat buffet version of HS2

With the hoo-ha about the hugely over-budget £18.5bn London Crossrail project still ringing in their ears, North West campaigners can be forgiven for thinking the region is overdue infrastructure spending on an equivalent (generous) scale. But don’t get your hopes up. This week we learned that the government wants you to know that the HS2 line from Crewe to Manchester – the authorising legislation for which began its parliamentary journey this week – is not an all-you-can-eat-buffet.

First, ministers nixed the £3bn Golborne link, which would have yoked HS2 to the West Coast mainline with the aim of taking the heat off the Wigan-Crewe section and funnelling more Scottish trains via Manchester. A slightly weird revised business case, published this week, suggests that because it might not totally solve the problem (a link south of Preston would cut another minute or two off journey times, an earlier review concluded) it’s best not to do it at all. The document makes a lot of the £96bn total cost envelope, and Warrington South MP Andy Carter called the link a “£3bn white elephant.” You can read the debate here.

The government is also pushing back on what it estimates as £5bn plans for an underground terminus as Manchester Piccadilly. Unless Manchester City Council can generate some very powerful leverage, that idea looks set to be going nowhere.

Get in touch with David Thame: david.thame@placenorthwest.co.uk | 01544 262127

The Subplot is brought to you in association with Oppidan Life.