Aykley Heads Topic Paper
Durham County Council
24 March 2014
22371/CH
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Contents
1.0 Introduction 1
2.0 Development requirements 3 Rationale for the development ...... 3 Key Assets of Aykley Heads ...... 7 Market Demand for Aykley Heads ...... 8 Consultation ...... 9 Case Studies ...... 10 Conclusions ...... 13
3.0 Potential occupiers 14 Current Occupiers ...... 14 Future growth sectors ...... 15 Locational Considerations ...... 18 Conclusions ...... 22
4.0 Delivery Constraints 25 Speculative Development ...... 25 Relocation of Durham County Council ...... 26 Conclusions ...... 26
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1.0 Introduction
1.1 Aykley Heads is a 6.8ha business and employment site, located immediately north of Durham City Centre. The site is currently a successful business and employment location, providing a home to a broad range of business across the public and private sectors.
1.2 Durham County Council’s Submission Draft Local Plan (Policy 7) identifies Aykley Heads as a Strategic Employment Site, predominately for new office development alongside a mix of other ancillary uses. To support the economic growth in Durham City and the wider County, the Submission Draft Local Plan Submission proposes the redevelopment of Aykley Heads to provide a Central Business Quarter comprising of 70,000sqm of office floorspace.
1.3 The redevelopment is estimated to create up to 6,000 gross new jobs, consistent with HCA/Offpat’s 2011 jobs density ratios for B1 General/HQ/ Business Park offices.1 Such development is designed to enhance Durham City’s role as an important employment centre and a location of choice for the economy’s growth sectors. The overall vision for the site is to create: “A new City Park at Aykley Heads, combining new high quality office development set within an exceptional landscape, for use by residents, businesses and visitors.”2
1.4 Key objectives of the development include:
The delivery of 70,000 sq m (750,000 sq ft) of new high quality, flexible office (use class B1) floorspace;
Setting new office development within a strong landscape framework which capitalises on the site's natural landscape features, provides integration with the surrounding landscape, captures and enhances wildlife potential and embraces environmental standards;
Creating a new gateway entrance, attractive networks for the movement of people and vehicles throughout the site, enhance public access and opportunities for sustainable travel to the City Centre and beyond via all modes of transport including public transport, walking and cycling; and
Promoting innovative approaches to sustainable design which reflect current best practice to ensure sustainable development, together with appropriate supporting utilities and infrastructure.3
1.5 In order to help support the commercial success of the site, ancillary facilities are expected to include a mix of (but not restricted to) convenience retail, food and drink facilities (restaurant, café etc.), a hotel and health facilities, crèches and a gym.
1.6 The development of a new City Park set within a strong landscape framework is designed to attract new national and international employers, presenting an
1 HCA/Offpat, (2010), Employment Densities Guide 2 Durham County Council, (2013), Aykley Heads, Durham City: Supplementary Planning Document 3 ibid
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opportunity to re-balance the nature of existing jobs on the site by increasing the proportion of private sector employment in Durham City.
1.7 Having regard to the above, this paper has been commissioned by Durham County Council in order to a contemporaneous test of the potential of the proposed development at Aykley Heads. The core elements of this study include a review of:
The rationale for the proposals and evidence of demand (Section 2);
Those sectors likely to be attracted to Aykley Heads (Section 3); and
Delivery constraints (Section 4).
1.8 This report draws upon existing evidence collated by Durham County Council and Business Durham and, where required, is supplemented by new research analysis and stakeholder consultations.
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2.0 Development requirements
2.1 This section considers the opportunity presented by Aykley Heads, focussing on the rationale for the development, key assets, evidence of demand and examples of similar developments elsewhere. It draws upon new and existing evidence in order to assess the potential of the proposed development.
Rationale for the development
Economic rationale
2.2 Durham County Council’s Economic Assessment indicates that whilst total employment in County Durham has shown strong growth during the years of economic expansion, it has failed to keep pace with regional and national comparators.4 This has resulted in the County falling significantly behind the UK and North East average in terms of employment rates, jobs density ratios (i.e. total number of jobs per working age resident) and GVA, as shown in Table 2.1 below.
Table 2.1 Relative performance of County Durham
Indicator County North East UK Durham Proportion of working age residents in employment 65.7% 66.2% 71.2%
Jobs density ratio 0.56 0.67 0.77
GVA per head £12,661 £15,842 £21,368 GVA indices: % of UK average- UK Average= 100% 60.7% 75.9% 100%
Source: NLP analysis of ONS data
2.3 In order to address this issue and to bring County Durham’s economic performance in line with the regional and national average, the County Durham Economic Partnership has set out the ambition of raising the employment rate to pre-recession levels. Recognising the relative under-performance of the North East region against national comparators, the North East Local Enterprise Partnership has also set an ambitious target of creating 100,000 new jobs in the next decade, equivalent to an 11% increase in employment.5 Supporting strong jobs and business growth within County Durham clearly has an important role to play in achieving this ambition and improving the long-term economic performance and sustainability of employment within the County.
2.4 With its accessibility to the strategic road network and East Coast mainline, World Class University, unique heritage and strong business, employment and
4 Durham County Council, (2011), County Durham Economic Assessment 5 NELEP, (2014), More and Better Jobs: A Strategic Economic Plan for the North East
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skills profile; Durham City is viewed as the commercial centre for Durham County, and a key asset from which to drive future jobs growth.6
2.5 The relative strengths of the area have long been recognised, with past jobs growth traditionally centred in and around Durham City, as demonstrated in Figure 2.1 and Figure 2.2 below.
Figure 2.1 Location of jobs in County Durham (2012)
Source: NLP Analysis of BRES data
Figure 2.2 Change in the number of jobs in County Durham (2003-2012)
Source: NLP Analysis of BRES data
6 County Durham Economic Partnership, (2011), Business, Enterprise and Skills Strategy: 2011-2016.
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2.6 The 2011 County Durham Economic Assessment also identifies Durham City and the A1M corridor into Tyneside as a significant economic driver, due to its inextricable links with the travel to work patterns for both in- and out- commuters to/from the Tyne and Wear conurbation.7
2.7 Overall, the former district of Durham City currently contains one fifth of the County’s business base and one third of its employment demonstrating its position as a key economic location within the County. As shown in Figure 2.3 below, the City also contains the highest proportion of residents with a qualification of NVQ Level 4 or above8, considered important in attracting high value business investment.
Figure 2.3 Percentage of residents with NVQ Level 4 or above qualifications
Source: NLP analysis of APS data
2.8 Strong growth in Durham City’s higher skilled workforce has predominantly been driven by a growth in public sector jobs and the attractive residential and cultural offer.9 Of concern however, is the fact that currently public administration, education and health represent 57% of the City’s employment base10, leaving the area vulnerable to the impact of public sector spending cuts.
2.9 A number of recent strategies and policies have identified the need to address the dominance of public sector employment within Durham City11, in order to
7 Durham County Council, (2011), County Durham Economic Assessment 8 Equivalent to a BTEC Higher National Certificate (HNC), Higher National Diploma (HND), City & Guilds Full Technological Certificate/Diploma, equivalent diploma, Foundation degree, nursing or teaching qualification or above. 9 ibid 10 BRES 2012 employment data 11 NELEP, (2014), More and Better Jobs: A Strategic Economic Plan for the North East; NLP, (2012), County Durham Employment Land Review; and Durham County Council, (2011), County Durham Economic Assessment.
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support the long term economic sustainability of the County. Building upon Durham City’s current strengths, accessibility, skills base and cultural offer, the City has been identified as a key local growth opportunity with respect to knowledge based sectors, financial professional and business services and advanced manufacturing.12
Geographical Constraints and Site Opportunities
2.10 Despite the City’s relative strengths, geographical constraints and a lack of available attractive sites are currently considered to be inhibiting business growth potential. As identified within the 2008 County Durham Employment Sites and Premises Study, Durham City currently has no modern Central Business District and a severe shortage of available employment sites.13 The study also indicates that: “In order to safeguard and enhance the City Centre (in terms of supporting the retail core, attracting inward investment, providing future employment opportunities and capitalising on the City’s key advantages including a strong university and excellent transport links), it is considered critical that a City Centre site be located for the delivery of high quality office accommodation.”14
2.11 The 2011 County Durham Economic Assessment further suggests that: “Development interest in Durham City is strong as a consequence [of the City’s key strengths] and the market views Durham City as the best location for office and housing development in the County. However, this potential is impeded as a result of the City being physically constrained in its current layout to deliver development activity and further economic growth.”
2.12 As a result of these challenges, it has not previously been possible for Durham County Council to identify a City Centre site of the appropriate scale and profile to attract significant private sector investment. Nearby sites are also considered to provide insufficient space to accommodate future employment growth. With its close proximity to the City Centre, the Submission Draft Local Plan identifies Aykley Heads as the most appropriate solution and a major opportunity to address a number of these issues.
2.13 The development of 70,000 sq m of new high quality flexible office space is designed to attract new national and international employers, supporting private sector investment and providing sufficient space to accommodate up to 6,000 new jobs. The site will also provide opportunities for local and regional businesses to remain within, or relocate to, County Durham. The creation of new private sector employment is considered to be essential in delivering stronger economic growth and in addressing the dominance of public sector employment.
12 Durham County Council, (2011), County Durham Economic Assessment 13 County Durham Economic Partnership, (2008), County Durham Employment Sites and Premises Study 14 ibid
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Key Assets of Aykley Heads
2.14 The identification of Aykley Heads as the most appropriate location for new office development has largely been driven by the location’s key assets. These are identified within the Aykley Heads: Supplementary Planning Document as:
Fast access to Newcastle International and Durham Tees valley Airports;
Excellent road network- proximity to A1(M), A690 and A167;
Excellent public transport links including Durham Bus Station and Durham Railway Station which lies on the East Coast Mainline and is within walking distance;
Well related to successful Durham Park and Ride sites, including the nearby Sniperley Park and Ride site;
City centre facilities within walking distance;
Proximity to one of the Country’s best Universities;
Mature parkland setting and location within an historic city; and 15 Views from the site of the historic core and World Heritage Site.
2.15 Existing alternative locations include Belmont Business Park, Freeman’s Reach and Mount Oswald, which serve a need for quality accommodation close to the City centre. However, these sites are not considered to offer a long term solution for the City, covering a smaller geographical space and located further away from the City centre. Current City centre provision including Millburngate House and offices located above shops are also considered to provide inadequate space for modern business requirements in the long term.
2.16 Aykley Heads is within walking distance to the City Centre and located within close proximity of Durham rail station (as shown in Figure 2.4 below). The success of Newcastle upon Tyne’s Quayside – containing a critical mass of quality office stock in an attractive location outside of the traditional City Centre (but within walking distance of the centre and rail station) – demonstrates the appeal of such an offer.
15 Durham County Council, (2013), Aykley Heads, Durham City: Supplementary Planning Document
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Figure 2.4 Aykley Heads Site Map
Source: Durham County Council, (2011), Aykley Heads SPD
2.17 Retaining such development within the former Durham City district is also considered important due to its strong transport links, existing business base, University and strong skills profile: all of which are important factors in attracting the higher value business investment essential in addressing the widening gap between the County’s performance and the regional and national average.
Market Demand for Aykley Heads
2.18 The factors outlined above demonstrate that there is a need for additional, quality office space within Durham City to support future jobs growth and that the assets of the site, in principle, are well aligned to this requirement. It is, however, also important to look at market demand.
2.19 Recent market testing undertaken by Business Durham (during late 2013/early 2014) revealed a substantial demand for office space in Durham City. From April 2013 until January 2014, 23 direct office enquiries were received. However, demand in Durham City is currently restricted by the lack of available office space. One enquiry from a Middle Eastern firm for land at Aykley Heads,
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for instance, did not proceed as it could not be brought forward within the timescales of the enquirer.16
2.20 The market testing also identified a consensus view that the business and professional services sector considered Durham City to be their core market area. However, the exercise suggested that Durham City is potentially losing out because it is perceived that there is currently a limited office accommodation offer. With little new build located in and around the City Centre, businesses have often been found to look elsewhere, with Durham City not making it to the short list.
2.21 Furthermore, where a specific demand for office space has been received, locations in Seaham and Peterlee have been put forward due to the lack of large office space available in Durham City. However, this is not of comparable quality to the offer proposed at Aykley Heads. Few agents were also found to hold Durham City properties as part of their portfolio due to the lack of available accommodation.
2.22 Where demand was evident, this has typically been for smaller office units as proposed at Aykley Heads, rather than large industrial sized units. Agents consulted as part of the market testing reported demand for offices across the board, from recruitment agencies to care sector operators and business service consultancies.
2.23 The key messages emerging from the dialogue with agents included the importance of the University as a differentiator and the need to play to the City’s strengths, including its road and rail accessibility. There was also a consensus that Durham would need to develop its own niche in order to support inward investment.
Consultation
2.24 The principal messages outlined above with respect to market testing by Business Durham were also echoed in consultations with key stakeholders and commercial property agents undertaken as part of this study. Key stakeholders interviewed as part of this work included:
North East Local Enterprise Partnership;
North East Chamber of Commerce;
Business Durham; and
Three private sector property agents (including DTZ, Storeys Edward Symmons and Ashley Smith).
2.25 Overall, consultees considered the current lack of commercial space to be a key barrier to businesses considering Durham City as a location, as potential investors typically preferred to visit existing sites in order to judge their suitability. Key attractions for businesses searching within Durham City included:
Proximity to the A1 and the East Coast Main Line; and
16 Business Durham, (2013), Aykley Heads Market Testing Report.
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Access to workforce.
2.26 The close proximity of the site to Durham University, rail station and City Centre were also identified as key assets in attracting new organisations and in accommodating potential spin out/management activity from the University.
2.27 Recent performance in terms of inward investment to County Durham, coupled with evidence of enquiries for new/additional office and commercial space within Durham City, was also felt to demonstrate a strong appetite for further development. Business Durham and a number of the commercial agents noted recent interest in investment in Durham City and strong interest surrounding Aykley Heads.
2.28 A strong demand and uptake of office space at the recently developed Rivergreen Centre at Aykley Heads (which rates as one of the most environmentally friendly office buildings in the UK) also gave confidence that additional high quality office space would be well received. The Rivergreen Centre is fully let by a broad range of professional service organisations, including consultancies, solicitors, architects and recruitment agencies (amongst others).
Case Studies
2.29 A number of agents also indicated that the market is somewhat interested in the type of product envisaged at Aykley Heads in Durham. However, as the potential economic development impacts of the proposed development currently remain untested an analysis of similar case studies can reveal an indicative outcome. It is understood from Durham County Council officers that a number of northern towns/Cities are planning similar schemes, as outlined below.
2.30 A key similarity in each of the planned Business Districts identified below lies in the close proximity of a rail station. This reflects the growing recognition that railway travel can support economic development. A number of recent studies have identified rail travel as being an important driver of economic activity. A 2014 report by the Economist for instance, notes that: “Twenty or thirty years ago business people were more likely to arrive in a city by car”….“Cities now measure their appeal by their [train] stations. Businesses Cluster around them: at King’s Cross, a once-grimy part of North London, a postcode has been created for all the new buildings around the station.”17
2.31 In more detail, these schemes include:
Preston: is seeking to develop a Central Business District which will play a vital role in transforming the city into an alternative destination to Manchester and Liverpool. The proposed CBD will deliver sustainable office development, set within attractive public areas surrounded by a complementary mix of other uses.
17 The Economist, (March 1st 2014), Rail Ambition.
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Doncaster: is planning to create a 10ha Civic and Cultural Quarter located behind the rail station with high quality facilities to attract people and businesses into the area. The development of the site is anticipated to bring £200 million of private sector investment into the town.
Darlington: is in the process of developing a 30ha site located next to the railway station at Central Park. The site is designed to include 500 new homes, 2,000 jobs, hotel and community and leisure facilities.
Chester: plans to develop a vibrant new Central Business Quarter next to the rail station, including 46,000 sq m of new office space, alongside complementary active uses, residential uses and new public spaces. It is estimated that the site will create 1,100 new jobs.
York: York Central located next to the city’s railway station, has been earmarked for more than 1,000 homes as well as offices and retail space, estimated to create 8,000 full time jobs upon completion.
2.32 An example of a similar, highly successful developed site can also be seen in Chiswick Park, located just outside of Central London. The strong accessibility of the site to sustainable transport options and design principles are considered key to its success. Whilst it is recognised that this site also benefits from its close proximity to Central London and larger South East labour market, it provides a useful example of how the combination of high quality commercial space with a high quality environment can help to attract business interest and support local economic growth.
2.33 This combination forms a central element of Durham County Council’s vision of Aykley Heads as: “combining new high quality office development set within an exceptional landscape, for use by residents, businesses and visitors”18, as shown below.
Figure 2.5 Concept Master Plan for Aykley Heads and design plan examples
Source: DCC., (2013), Aykley Heads SPD
18 Durham County Council, (2013), Aykley Heads, Durham City: Supplementary Planning Document
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2.34 It also reflects the scale of Durham County council’s ambition of creating a site with the “potential to become a flagship employment site in the North East Region.”19
Case Study: Chiswick Park
Chiswick Park is a central business district located five miles from central London and eight miles from Heathrow. The 13ha site includes c.140,000 sq m of office space spread between twelve award winning buildings, plus restaurant and bar, swimming pool and fitness centre.
The site was developed in response to a high demand for additional employment space located out of Central London, with strong accessibility. Chiswick Park’s current site was selected as a result of its potential to accommodate a high environmental landscape and accessibility to the M4, A4, the North/South circulars and tube station.
The site itself was developed on former industrial land and is largely dependent on public transport, located close to Gunnersbury underground station. In developing the site, it was estimated that 75% of those working there would arrive either on foot, or by bicycle, bus or train.
Each building faces the park's 'inner garden' with a featured two-tier lake, waterfall, decked boardwalk, pathways and a variety of tree planting. The environment of the park both indoor and out, is themed to enhance the overall experience of working at Chiswick Park. The quality of the environment at Chiswick Park has resulted in the site being identified as one of the UK’s best 50 workplaces annually from 2007-2012.
Since the site’s development, Chiswick Park has been successful in filling 98% of the available space, securing a number of blue chip businesses, including (inter alia):
Aker Solutions PepsiCo CBS News QVC Ericsson Singapore Airlines International Game Technology The Walt Disney Company Paramount Pictures International Tullow Oil
19 ibid
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Conclusions
2.35 With the recent economic performance of County Durham falling significantly behind regional and national averages, action is clearly required to boost jobs growth within the County. The Functional Economic Area of Durham City forms the principal commercial centre of the County, benefitting from key strengths including access to rail and road links, University and strong skills base. Accordingly, the provision of high quality office space on the edge of Durham City presents a clear opportunity to attract the high value businesses required to support stronger economic growth.
2.36 Aykley Heads has been identified as a strategic location to accommodate new businesses within close proximity to Durham City Centre. The size and accessibility of the site presents a key opportunity to develop high quality office space set within an exceptional landscape.
2.37 Market demand for commercial space within Durham City, whilst evident from the high take up of space at the Rivergreen Centre at Aykley Heads, is currently considered to be limited by the lack of commercial space currently available within the City Centre. Aykley Heads, therefore presents a strong opportunity to accommodate future jobs growth, creating a larger scale of employment offer for the City.
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3.0 Potential occupiers
3.1 In order to identify those sectors that are likely to drive demand for space at Aykley Heads, it is important to consider:
The profile of current occupiers; and
Anticipated growth sectors in County Durham and the typical locational requirements of occupiers in these sectors.
3.2 The following sections present a high level analysis of current evidence regarding the above, followed by a summary of potential target sectors.
Current Occupiers
3.3 The representation of existing sectors at Aykley Heads provides a useful starting point in understanding which sectors may drive future demand as clearly, the current site holds some appeal for occupiers of this nature.
3.4 Existing sites located at Aykley Heads currently include:
Salvus House, forming the Headquarters for Sunderland Marine Insurance;
Aykley Heads House;
Durham Constabulary (currently developing a new Headquarters adjacent to the current site);
Durham Trinity School/Sports College (with current plans to develop a new school building on site);
Rivergreen Business Centre; and
Aykley Heads Business Centre (comprising of Northumbria House, Prospect House and Forest House).
3.5 An analysis of the existing businesses located within these sites identifies a broad range of sectors, including financial and business services, specialised construction, education, health and public services, as demonstrated in Table 3.1 below.
Table 3.1 Current Occupiers at Aykley Heads
Sector Organisation Financial and Business Services Sunderland Mutual Marine Insurance North East Chamber of Commerce H&H Land and Property Swinburne Maddison Solicitors LLP Business Durham Accounting Sense Building Design Northern Ltd CK Science dewpoint. Energy EFM Consulting Ikon GeoPressure Ingreen Architectural Solutions Ltd
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Sector Organisation Mazars LLP Morgan Sindall Investments Ltd RiverStone Wealth Management Substation Design Applications Ltd Supplymatch Teachers Ltd Sustain Agility Ltd TGA Vision for Education Specialised Construction Vardy Property Group Muxworthy Property Solutions Rivergreen Developments PLC Health and social work North Durham Clinical Commissioning Group Healthcare Management Stepping Stones Education Arc Behavioural Consulting Intraining National Youth Choir of Great Britain Durham Trinity School / Sport College Public services National Offender Management Service (NOMS) Durham County Council Lieutenancy Office Durham Constabulary Tourism and leisure Bistro 21 Durham Light Infantry Museum Waste and Recycling Premier Waste Charity Safe Families for Children
Source: Durham County Council 2014
3.6 The range of businesses identified in Table 3.1 above demonstrates the broad appeal of Aykley Heads as a business location at present. Strong clusters of activity relating to financial and business services (including the selection of Aykley Heads as a Headquarter site for Sunderland Marine Insurance) and construction/real estate would, however, appear to offer the greatest potential to realise Durham County Council’s aim of facilitating private sector-led growth on the site.
Future growth sectors
3.7 In order to understand in more detail which sectors may seek space within Aykley Heads in future, it is also important to consider which employment sectors are best placed to drive future growth. The following paragraphs draw together recent evidence relating to growth sectors, as set out in the County Durham Economic Assessment, Business, Enterprise and Skills Strategy and County Durham 2012 Employment Land Review.
County Durham Economic Assessment, (2011)
3.8 The County Durham Economic Assessment uses three broad approaches in considering the economic potential of key sectors within County Durham. This includes an assessment of: sectors that spanned much of the County’s economy, selected sectors considered to offer growth potential, and niche sectors.
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3.9 The overall findings of this review suggest that whilst large employment sectors such as manufacturing and public services are expected to decline as a result of economic recession and spending cuts, key opportunities exist within niche sub-sectors and supply chains, as outlined below:
Public Services: With strong employment growth - largely driven by a period of sustained investment - in health, education and other public services, supply chain opportunities are identified in related professional and managerial services.
Advanced Manufacturing: Despite an anticipated decline in traditional industries, employment in the advanced manufacturing sub-sectors and in small niches is expected to increase.
3.10 Additional growth opportunities were also identified in the following sectors:
Financial, professional and business services: With strong growth in recent years, this sector is identified as an important component of the economy. Key opportunities are highlighted within ICT, customer care and specialisms such as offshore wind.
Tourism and leisure: Representing one of Durham’s strongest growth sectors, with particularly strong growth in retail, hospitality and restaurants, the sector is considered to offer accessible employment opportunities and significant potential to expand over the coming years.
Digital and creative: With recent impressive rates of growth, it is anticipated the digital and creative sector could make an increased contribution in future, both directly in terms of jobs and output, and indirectly in terms of improved productivity within other parts of the economy.
3.11 Business services and the tourism industries in particular are identified within the Economic Assessment as providing key growth opportunities, alongside the digital and creative sectors. Work undertaken to inform the Economic Assessment also identified a number of niche engineering and manufacturing growth opportunities related to printable electronics, offshore wind and low carbon vehicles; building upon existing assets at NETpark and the investment by Hitachi.
Business, Enterprise and Skills Strategy: 2011-2016, (2011)
3.12 The 2011-2016, Business, Enterprise and Skills Strategy identifies six sectors that have significant potential to create wealth in County Durham in the coming years based on recent performance. These include:
Financial, professional and business services: Whilst the strategy indicated that the sector did not achieve its full potential in the last economic boom, it is thought to have the potential to generate sustainable growth from a low baseline position.
Distribution: With County Durham’s geographical location in the North East region and road and rail infrastructure, this sector is identified as being in a good position to attract more direct and associated jobs.
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Environmental Technologies/Energy: Although currently energy accounts for a small proportion of employment, the sector has shown strong signs of growth and potential to capitalise on the wider North East renewable energy sector market.
Manufacturing: This sector is identified as a significant employer, with many businesses well positioned to grow in coming years in response to the growing export market and international demand.
Tourism and leisure: On the basis of on-going improvements to Durham City and visitor attractions across County Durham, the tourism sector is well placed to accommodate future growth.
Health and social work: This industry is expected to grow in response to County Durham’s ageing population and the corresponding increase in demand for such services.
3.13 Whilst the performance of these sectors is currently mixed, each is considered to have the potential to drive economic growth in terms of productivity, employment rate and business stock. Supporting growth in the professional, scientific and technical services sector in particular, is also thought to be important in bringing County Durham more in-line with the national economic profile.
County Durham Employment Land Review, (2012)
3.14 The 2012 Employment Land Review identifies a number of sectors with growth potential based on the concentration of employment relative to the regional average (demonstrating sectors with a competitive advantage) and recent growth performance. From this assessment key growth sectors, identified within the ELR as offering strong/moderate future growth potential in County Durham, include:
Financial and Business Services: Demonstrating strong employment growth over the past decade (albeit from a modest base), the financial and business services sector is anticipated to experience strong to medium growth going forward, with Durham City expected to capture a significant proportion of any increased activity.
Distribution: With stronger growth than observed regionally, the distribution sector (and its various sub-sectors: warehousing, storage and wholesaling) within County Durham is anticipated to deliver moderate to strong growth, focussed particularly around the A1 and A19 corridors.
Information and Communications Technology (ICT): Growth in the ICT sector between 1998- 2008 was more than three times that observed across the North East region, indicating significant recent success. Future growth, however, is anticipated to be modest, driven largely by indigenous businesses and incubation facilities.
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Environmental Technologies/Energy: The renewable sector is considered to offer moderate growth potential. The ELR indicates that activity related to offshore energy is likely to be concentrated elsewhere in the North of England, although County Durham is expected to benefit through the supply chain.
Advanced Manufacturing: Future growth in manufacturing is anticipated to be determined by the area’s ability to encourage more specialist, higher value manufacturing and R&D activities that are less sensitive to competition. Investments and developments such as Hitachi and NETpark and their subsequent supply chains are anticipated to present key opportunities for future growth.
Retail: Whilst consumer spending is likely to be constrained in the medium term as a consequence of the Government’s austerity measures and instability in the housing market, County Durham’s: Retail and Town Centre Uses Study projects that Durham will experience modest growth.
Tourism and leisure: Plans to pursue a combination of measures to improve and develop new facilities, as well as promoting the County’s offer more effectively, are considered to present significant scope for growth within the sector. Overall, it is considered that tourism offers moderate-to-strong potential for future employment growth.
Health and Social Care: Central Durham is considered to have sufficient capacity in existing facilities to service current and future demand on the basis of natural population growth. The impact of new housing developments, and the rising ageing population, however, could result in greater jobs growth.
Waste and Recycling: In overall terms, the ELR suggests that a modest degree of employment growth is likely in Waste and Recycling, building on the relatively high proportion of employment in County Durham in this sector, relative to the regional average.
Education: Projected demand within the education sector is anticipated to present moderate growth opportunities, linked to projected population increases and planned housing growth. New developments for employment growth are estimated to be minimal however, as the majority of planned investment that is due to take place on existing sites.
Locational Considerations
3.15 Whilst the above strategies and assessments highlight a range of sectors identified as offering growth potential in County Durham, clearly each is likely to give rise to very different land and premises requirements. As such, it is also useful to understand the typical space requirements of these sectors in order to identify those likely to view Aykley Heads as an attractive business location.
3.16 Table 3.2 below presents a summary of the identified potential growth sectors, their anticipated growth prospects and typical space requirements.
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Table 3.2 Growth Prospect Comparison
Sector Growth Prospect Typical Space summary requirement Financial and Business Services B Class Environmental Technology/ Energy B Class Advanced Manufacturing B Class ICT B Class Digital and Creative B Class Distribution B Class Education Non B-Class Health and Social work Non B-Class Public Services Non B-Class Tourism and Leisure Non B-Class Waste and Recycling Non B-Class Manufacturing Non B-Class Retail Non B-Class
Key: Low growth Moderate growth Strong growth anticipated anticipated anticipated
Source: NLP Analysis
3.17 As outlined above, a number of the sectors listed above would not typically occupy B1 office product anticipated at Aykley Heads. Nevertheless, it is recognised that some functions of sectors such as Environmental Technology/Energy and Advanced Manufacturing (including design and consultancy), may require high quality office space, rather than large industrial units. On this basis, sectors with the strongest alignment to the provision of B1 Class office space at Aykley Heads and with strong/moderate growth potential include:
Financial and Business Services: This sector includes a range of specialist financial, insurance and general business service activities such as accountancy, legal, engineering, architecture and consultancy.
Environmental technology/Energy: This broad sector covers a wide spectrum of activity ranging from craft and traditional industries through to advanced, knowledge-intensive operations.
Advanced Manufacturing: This broad sector covers a wide spectrum of activity ranging from craft to advanced, knowledge-intensive operations.
ICT: This sector includes computer software development, programming and IT support.
Digital and Creative: This diverse sector includes activities such as publishing, graphics, software and web-design.
3.18 Focussing in more detail on the above sectors, the following paragraphs outline the typical locational considerations of these sectors in order to understand in more detail if the proposed developments at Aykley Heads could offer a suitable location.
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Financial and Business Services
3.19 Business location decisions in the financial and business services sector are typically driven by factors including:
Access to markets/suppliers;
Access to a skilled and diverse workforce;
High quality transport and telecommunications infrastructure; and
Quality of life factors including good housing and cultural facilities supporting the attraction of high calibre staff.20
3.20 Alignment to Aykley Heads: Aykley Heads’ location within the former Durham City district offers access to highly skilled graduate labour pool and a varied cultural offer, along with high quality environment and housing stock which can also play a key role in attracting and retaining skilled workers. Furthermore, the strategic road network and East Coast mainline offer good accessibility as required by this sector. On this basis, Aykley Heads is well placed to capture growth in the Financial and Business Seervices sector.
Environmental Technologies / Energy
3.21 Key factors in location decisions for the Environmental Technology/Energy sector include:
Proximity to renewable energy sources (e.g. wind farms) and transport nodes (e.g. docks);
The availability of skilled labour;
Proximity to universities with relevant research specialisms; and 21 Access to customers/suppliers.
3.22 Alignment to Aykley Heads: The County’s strength with respect to organic photovoltaics is underpinned by the location of PETEC (Printable Electronics Technology Centre) at NETPark. This suggests that key growth/supply chain opportunities are likely to be presented within County Durham. With its close proximity to Durham University, Aykley Heads will be well placed to benefit from research/supply chain opportunities requiring office based activity//HQ/HR activity in the Environmental Technologies/Energy sector.
Advanced Manufacturing
3.23 Key locational decisions for higher value Manufacturing and Engineering uses relying on greater technology and skill inputs typically require:
Proximity to the strategic road network;
High quality business park environments; and 22 Access to highly skilled staff.
20 County Durham Employment Land Review, (2012), Nathaniel Lichfield & Partners 21 ibid 22 ibid
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3.24 Alignment to Aykley Heads: As with Environmental Technologies/Energy, existing facilities at NETpark and Hitachi’s investment in Newton Aycliffe, present key growth opportunities for County Durham. The close proximity of Durham University, access to strategic road networks and proposed high quality office space at Aykley Heads, therefore present potential growth opportunities for office based design/consultancy/management activity within the wider supply chain.
ICT
3.25 ICT businesses typically choose a location on the basis of:
Quality of life factors;
Availability of skilled workers;
Broadband connectivity;
Proximity to major conurbations (particularly London); and 23 The image of the location.
3.26 Alignment to Aykley Heads: Durham City offers key locational advantages in terms of quality of life and access to a skilled workforce. Additionally, the East Coast mainline provides good access to major conurbations. As such, Aykley Heads could present a strong offer for the IC sector, if combined with appropriate broadband connectivity. However, existing ICT activity and established clusters elsewhere in the North East, (such as Sunderland’s Software City and Digital City in Middlesbrough), may provide strong competition.
Creative Industries / Media
3.27 Key locational factors for the Creative Industries/Media sector are comparable with those for ICT and include:
Access to broadband;
Image of the location;
Quality of life benefits;
Access to London or other large metropolitan centres;
The availability of skilled staff; and 24 Often town centre premises with a good cultural image.
3.28 Alignment to Aykley Heads: The County as a whole offers some strong attractions to occupiers in the Creative Industries/Media sector, including relatively low accommodation and labour costs (which can help to attract start- ups and entrepreneurs) as well as quality of life factors which are particularly important to footloose occupiers. The environmental quality of the proposed Aykley Heads development, availability of skilled staff and close proximity to the City Centre suggest that Aykley Heads may provide a suitable location.
23 County Durham Employment Land Review, (2012), Nathaniel Lichfield & Partners 24 ibid
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However, as the vast majority of creative organisations are SME’s25, cost implications will be critical. Furthermore, whilst the offer of modern space may prove attractive to larger creative firms, the typical occupation of creative firms in redeveloped cultural premises also suggests that growth opportunities from this sector at Aykley Heads may be limited.
Conclusions
3.29 Based on the above analysis, Table 3.3 below presents an assessment of the overall suitability of the proposed Aykley Heads redevelopment for the identified key sectors. As shown below, the financial and business services sector clearly presents the strongest potential for growth and alignment with the offer available at Aykley Heads.
3.30 The presence of an existing base of financial and business service sector organisations within Aykley Heads adds further confidence to this assumption. The selection of Aykley Heads by the former Sunderland Marine Insurance group to develop a purpose build headquarters in 2007 at Aykley Heads also demonstrates the relative strengths of the area.
3.31 The relative low cost of accommodation at Aykley Heads in comparison to alternative sites in Newcastle upon Tyne/Sunderland also presents additional opportunities in terms of providing a competitive offer in capturing any subsequent growth or expansion of the financial and business service sectors. The close proximity of the rail station is also felt to present opportunities in attracting financial/legal firms who typically require easy access to London/ Newcastle/ Edinburgh.
25 http://old.culture.gov.uk/images/publications/CIC_Meeting_240112.pdf
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Table 3.3 Overall assessment
Identified as a potential growth Alignment sector between locational requirem- County Business, Strong/ ents and Overall Durham enterprise County Moderate Aykley assess- Current Economic and Skills Durham Growth Heads ment of occupant Assessment Strategy ELR potential offer potential Financial and Business Services Environmental Technologies/ Energy Advanced Manufacturing
ICT
Creative Industries / Media
Key: Low alignment/potential Moderate alignment/potential Strong alignment/potential
Source: NLP 2014
3.32 The other sectors listed within Table 3.3, including environmental technologies/energy, advanced manufacturing, ICT and creative industries/media, are considered to offer moderate potential for Aykley Heads. The provision of B1 office space is potentially suitable for businesses with office space requirements, however, it is recognised that the main focus of development within these sectors is likely to be concentrated elsewhere.
3.33 It is also important to recognise that the sectors listed above represent those which have both been identified within recent studies as offering growth potential and those that typically occupy B1 office space, and do not represent an exhaustive list. Based upon the profile of current occupiers outlined in section Table 3.1, it is recognised that growth opportunities may also be presented by the expansion of current occupiers/attraction of similar businesses to Aykley Heads. In particular, key opportunities may be offered by:
Leisure and tourism: Recognised as a potential growth sector but not typically occupying B1 space, opportunities may be presented in the fields of leisure and tourism management/marketing, or within the ancillary facilities developed at Aykley Heads.
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Health and education: As with leisure and tourism, health and education sectors do not typically occupy B1 space, however as recognised within County Durham’s Economic Assessment, opportunities may arise in health/education development, research and management. Uptake of space within the current sites at Aykley Heads and recent enquiries to Business Durham also suggest that professional services elements of healthcare delivery (i.e. HR/management etc.) may present opportunities for the proposed development.
Construction: Whilst not identified a specific growth sector within recent policy documents, elements of specialised construction firms including management, consultancy, surveying etc. may be attracted to B1 office space. The UK Government’s housing growth agenda and Durham County Council’s commitment to supporting development within the Submission Draft Local Plan also suggests that growth in such sectors may be greater in future.
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4.0 Delivery Constraints
4.1 In order to understand the extent to which Aykley Heads can provide a successful business location, it is essential to consider the factors that may constrain the site’s delivery.
4.2 Consultations undertaken with key stakeholders as part of this study revealed two key issues which may impact on the site’s potential to deliver its overall objectives, including:
The challenges of attracting interest in speculative development opportunities; and
The relocation of Durham County Council from their current site at Aykley Heads.
4.3 The potential impacts if these issues are discussed in more detail below.
Speculative Development
4.4 A key challenge outlined by consultees was the ability to attract interest from businesses to commit to locating at Aykley Heads prior to the space being built out. Commercial agents, in particular, remarked on the preference for prospective businesses to view completed potential sites and get a ‘feel’ for the quality of product and environment, in order to gauge if the space is suitable for their needs.
4.5 Linked to this, was a concern that developers would have reservations about building out the proposed space at Aykley Heads in times of relative economic uncertainty, without specific interest from prospective tenants. Consultees suggested that securing interest in speculative development in general is challenging, and the development of a clear and detailed design code will be required to support this. Suggestions also included the potential for Business Durham to generate a specification for a managed workspace development to create momentum in the market, and to provide an example of the quality of product to be developed at Aykley Heads.
4.6 Recent market interest in commercial space within Durham City, strong uptake of space at the Rivergreen Centre at Aykley Heads and interest in the future developments at Aykley Heads (as reported by Business Durham and the engaged commercial agents), does however, provide confidence that as plans develop further, market interest will strengthen.
4.7 Larger firms and enquiries regarding the development of Headquarter sites, were typically found to operate on a 2-3 year timescale and therefore more likely to consider developments prior to build. Smaller firms, however, were identified as being more likely to consider relocating in a shorter timescale, and therefore to express formal interest typically at a later stage.
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4.8 A number of the commercial agents suggested that businesses have previously focussed their accommodation searches outside of Durham City, due to the perception that there is currently a limited accommodation offer.
4.9 The development of a detailed design code and Masterplan is therefore considered to be essential in securing stronger interest from businesses and providing businesses with greater confidence in the scope and scale of planned developments.
Relocation of Durham County Council
4.10 County Hall, which is currently occupied by Durham County Council has been identified as a key redevelopment site within the Aykley Heads development plans. The Council intends to relocate services to a site outside of Aykley Heads and to demolish and redevelop the existing site to provide modern, flexible office space that can meet the needs of new occupiers.
4.11 Currently County Hall currently has a net internal floor space of 23,000 sq m and accommodates approximately 1,650 office staff; it has a premises related running cost requirement of approximately £1.4m per annum and a capital expenditure backlog requirement that is currently £2.45m and therefore is clearly no longer fit for purpose.
4.12 As such, for the purposes of forward planning, 2019/20 has been assumed to be the year that the site will be available for development to start, irrespective of where and how the Council relocates. Alternatively, if the Council relocates within the strategic development site at Aykley heads then the timing of the start of development on the strategic employment site could come forward, potentially by 1 to 2 years to 2016/17.
4.13 It is understood that the Council are currently undertaking an options analysis to confir the most appropriate way forward. Options include, but are not limited to:
Full retrenchment from the Aykley heads site and either relocation within the City or dispersal across the County; or
Retaining a presence at Aykley Heads either in full, or in part, both of which would still provide substantial opportunities for further inward investment.
4.14 Indeed, in respect of the second scenario, Rotherham Borough Council has recently reduced their space requirements by 50%. As such, even if the Council retains a presence on site this will not compromise the overall aim of achieving significant private sector investment at Aykley Heads.
Conclusions
4.15 Whilst the challenges outlined above represent some concerns regarding the deliverability of Aykley Heads, market interest and the further development of plans to relocate Council services provide confidence that these issues can be overcome. The development of a Masterplan for Aykley Heads in particular is
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considered important in securing further interest in the site and in ensuring the success of the development plans.
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