Northampton Waterside Enterprise Zone Review
Prepared for: Northampton Borough Council
DRAFT FOR COMMENT October 2020
Northampton Waterside Enterprise Zone Review
Table of Contents
Executive Summary ...... 3 1. Introduction ...... 9 1.1. Instruction ...... 9 1.2. Enterprise Zone Rates Additionality Mechanism ...... 10 2. Market Review Summary ...... 11 2.1. Industrial Market ...... 11 2.2. Office Market ...... 17 2.3. Retail Market ...... 20 3. The Northampton Waterside Enterprise Zone sites ...... 23 3.1. Introduction ...... 23 3.2. Site summary ...... 23 3.3. Development assumptions ...... 25 4. Successful Development to Date ...... 27 4.1. One Angel Square at Site 17 ...... 27 4.2. The University of Northampton Innovation Centre at Site 13 ...... 27 4.3. Northampton Railway Station at Site 12 ...... 28 4.4. Hellermann Tyton at Site 7C ...... 28 4.5. St John’s Student Accommodation at Site 19 ...... 29 4.6. Premier Inn Hotel at Site 18 ...... 29 4.7. Summary of all completed development ...... 29 5. Enterprise Zone Business Rates Modelling ...... 30 5.1. C&W Infrastructure Funding Model ...... 30 5.2. Modelling Scenarios ...... 30 5.3. Modelling Assumptions ...... 31 5.4. Infrastructure Funding ...... 34 5.5. Financial Analysis ...... 35 5.6. Modelling summary ...... 42 5.7. Financial modelling findings ...... 43 6. Site prioritisation ...... 46 7. Conclusion and recommendations ...... 49 7.1. Report summary ...... 49 7.2. Financial modelling findings ...... 49 7.3. Site specific recommendations ...... 51 7.4. Concluding thoughts ...... 52 Appendix A Enterprise Zone map ...... 55
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Appendix B Detailed summary of the Northampton Waterside EZ sites ...... 1 Site 1: Duston Mill Lane ...... 2 Site 2: Upton Way ...... 2 Site 3: Sixfields & Walter Tull Way ...... 3 Site 4: Franklin’s Gardens ...... 4 Site 5: Sharman Road and Lincoln Street ...... 5 Site 6: Wreford’s ...... 5 Site 7: Edgar Mobbs Way ...... 6 Site 8: Harvey Reeves Road ...... 7 Site 9: St James Mill Road and Maltings ...... 8 Site 10: St James Mill Road East ...... 8 Site 11: St James Mill Road Riverside ...... 9 Site 12: Northampton Railway Station ...... 9 Site 13: St Peter’s Way ...... 10 Site 14: Freeschool Street ...... 11 Site 15: St Peter’s Car Park ...... 12 Site 16: National Grid Site ...... 13 Site 17: Project Angel ...... 13 Site 18: Albion Place...... 14 Site 19: St John’s ...... 15 Site 20: Bridge Street, Cattlemarket Road and Carlsberg...... 16 Site 21: Avon, Nunn Mills and Avon South ...... 17
Disclaimer: The outbreak of the Novel Coronavirus (COVID-19), declared by the World Health Organisation as a “Global Pandemic” on the 11th March 2020, has impacted global financial markets. Market activity is being impacted in many sectors. As at the date of this report, we consider that we can attach less weight to previous market evidence for comparison purposes, to inform viability, pricing and related recommendations and advice. Indeed, the current response to COVID 19 means that we are faced with an unprecedented set of circumstances on which to base a judgement. Given the unknown future impact that COVID-19 might have on the real estate market, we recommend that you keep under frequent review the advice contained in this report.
Version Prepared by Approved by Date Draft for comment – v1 Claire Evans Jonathan Turner 28/8/20 Draft for comment – v1 Claire Evans Jonathan Turner 23/10/20
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Executive Summary
1.1. Instruction Cushman & Wakefield has undertaken a detailed review of the Northampton Waterfront Enterprise Zone, with a focus on reporting on development progress to date and establishing the future development potential of the zone and what interventions the Council can make to maximise this. We undertook a site review, including a detailed review of the Rating List to understand the nature of new development since the inception of the EZ. We also reviewed which buildings have been demolished, to understand what business rates income has been lost and needs to be netted off any ‘new’ business rates income generated by new development. A detailed site summary is included at Appendix B. The site has seen a significant number of successful development schemes (Scenario 1 sites) that are already generating business rates income every year, producing a total surplus for the zone that the LEP can reinvest. This is a huge success story as this income is certain and accumulates for each year of the EZ. We undertook a high-level review of this completed development to highlight the benefits of each scheme, including job creation. We also undertook a market review to determine the development potential of the remaining EZ sites. This identified that a number of the EZ sites are either fully developed out, or that there is no available land that is suitable for development. This market review also identified a number of sites with strong development potential (the Scenario 2 & 3 sites) that the Council can focus on to maximise development in the zone, and we make site specific recommendations on these below.
1.2. Financial modelling findings Cushman & Wakefield has developed an infrastructure funding model which brings together the overall financial impacts of the EZ including business rates additionality arising from new development set against investment in intervention. The purpose of this model is to provide financial projections for the Enterprise Zone and to enable a range of income and investment scenarios to be modelled in order to assist with business planning. The model enables different assumptions and scenarios to be analysed to show the impact on business rate income of varied levels of take up/ development. Based on our engagement with stakeholders and C&W’s market knowledge of the sites, we have produced the following EZ model scenarios:
SCENARIO 1 – COMPLETED DEVELOPMENT PROFILE This represents and models development that has already taken place on site, since the start of the Enterprise Zone. In this regard it can be considered the ‘worst case’ scenario as it relates to certain business rates income that is already being generated and doesn’t take into account any future development.
SCENARIO 2 – REALISTIC FUTURE DEVELOPMENT PROFILE This represents and models C&W’s view of take up for each site, based on the market review of the sites, and knowledge of progress made on each site to date. In our view, this represents the most likely scenario to be realised.
SCENARIO 3 – OPTIMISTIC DEVELOPMENT PROFILE This represents and models all future development that could take place on the sites throughout the Enterprise Zone. Projects included in this scenario are unlikely to come forward in the
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immediate future due to limited design and planning or due to a lack of market demand. This scenario will provide the best-case scenario for the enterprise zone, assuming that all potential development Is brought forwards.
WHOLE ENTERPRISE ZONE The following table summarises the overall findings of the financial modelling at the EZ level for each development scenario:
EZ Overall Scenario 1 Scenario 2 Scenario 3
Projected Rates Income* £32.25 Million £85.34 Million £89.01 Million
Contingency (on income) @ 10% -£3.23 Million --£8.53 Million -£8.90 Million
Capital Exp. Financing Costs -£9.35 Million -£24.93 Million -£24.93 Million
Revenue Exp. 0 0 0
Break even year (model in surplus) 2017 (year 6) 2017 (year 6) 2017 (year 6)
Peak deficit amount -£0.28 Million -£0.28 Million -£0.69 Million
Peak deficit year 2016 (year 5) 2016 (year 5) 2016 (year 5)
Surplus/Deficit (incl. Contingency) £18.05 Million £47.61 Million £50.72 Million
This demonstrates the significant surplus of £18.05 Million that is already being generated by the completed development in the EZ. This income is certain and available to be reinvested by the LEP. When Scenario 2 sites are modelled, this surplus increases by £29.56 to £47.61 Million. This more than doubles the surplus generated in the EZ and highlights the importance of prioritising interventions that increase the certainty of this income. Some of these schemes are nearing completion and so pose less of a risk, such as the Vulcan Works, whilst sites such as those proposed for industrial development (Sites 1,2,3 & 7) require a greater level of intervention to accelerate their delivery. The Scenario 3 sites are considered riskier in market and delivery terms. They rely on the success of Scenario 2 schemes (such as Four Waterside and Vulcan Works) to strengthen the town centre office market and grow demand for new town centre office accommodation. If these sites come forward in line with assumptions, this could generate an additional surplus of £3.11 Million, a total across the EZ of £50.72 Million. This figure represents the development potential of the whole EZ.
SITE SPECIFIC – SCENARIO 1 SITES The relocation of the Cosworth factory at Site 11, St James Mill Road Riverside demonstrates a good example of the benefit of EZ designation. The site generates a positive surplus to the zone of £1.76 Million after a GPF repayment of £1.20 Million is paid down.
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The remaining sites are split into ‘surplus’ and ‘deficit’ sites, as follows. The negative position of the deficit sites is attributable to the demolitions, the total impact of the lost business rates being greater than the new business rates generated by the new development
Surplus sites Deficit sites
• Site 1 Duston Mill Lane • Site 3D Ross Road • Site 7C Edgar Mobbs Way South • Site 5B Lincoln Street • Site 12 Northampton Railway Station • Site 8 Harvey Reeves Road • Site 15 St Peter’s Car Park • Site 9A St James Mill Road • Site 16 National Grid Site • Site 10 St James Mill Road East
• Site 17 Project Angel (One Angel Square) • Site 13 St Peter’s Way (Innovation Centre) • Site 17 Project Angel (The Brewery) • Site 14 Freeschool Street • Site 18 Albion Place (Premier Inn) • Site 19 St John’s • Site 20A Bridge Street
• Site 20C Carlsberg
• Site 21 Avon/ Nunn Mills
The development of One Angel Square at Site 17, Project Angel, produces the most significant positive impact with a surplus of £15.27 Million. The Scenario 1 sites raise an additional issue that requires further consideration. Some sites are allocated to be brought forward for residential development and therefore will not generate any business rates income. However, demolitions have already occurred, and these sites have a negative impact on the overall EZ. We are aware of MHCLG taking a practical approach to this situation and recommend that the Council commences discussions to understand whether these sites can be disregarded.
SITE SPECIFIC – SCENARIO 2 SITES Site 12, the Railway Station car park, and Site 13, Four Waterside are the only Scenario 2 sites that have a capital cost attributed to them. Four Waterside produces a surplus of £1.42 Million, an encouraging result in the context of the strategic importance of this site. The Railway Station car park at Site 12 generates a deficit of -£4.91 Million. Site 17, Vulcan Works, also produces a surplus of £4.36 Million, but does not have any capital costs attributed to it. The industrial development at Sites 1,2,3 & 7 provide the opportunity to grow the business rates surplus of the wider EZ. These represent strong development opportunities and should be phased so as not to compete with one another. We discuss site specific recommendations for these sites in Section 7.3. These industrial sites all produce a surplus, although do not have any capital costs attributed to them.
SITE SPECIFIC – SCENARIO 3 SITES Neither Scenario 3 schemes have any capital costs attributed to them, or business rates lost due to demolitions. Site 16, Horizon Park generates a surplus of £1.5 Million, although the heritage aspect of this scheme adds complexity, cost and risk. The office element of the scheme at Site 18, Swan Street generates a surplus of £1.61 Million.
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1.3. Conclusion
1.3.1. KEY SUCCESS STORIES The Northampton Enterprise Zone has made strong progress to date, with over 50,000 m² of new development that has created a total projected rates income of £32.25 Million (Scenario 1 sites). Overall this produces a total surplus of £18.05 Million over the life of the EZ, which creates a significant and certain income stream for the LEP. Key success stories include: • Site 17, Project Angel, One Angel Square • Sites 13, The University of Northampton Innovation Centre • Site 12, Northampton Railway Station • Site 7C, Hellermann Tyton development • Site 18, Albion Place, Premier Inn
1.3.2. FUTURE DEVELOPMENT POTENTIAL The zone has the potential to create an additional £32.67 Million of a total surplus over the life of the zone, £29.56 Million of which is from development that we determine to be ‘realistic’ (Scenario 2 sites), and an additional £3.11 Million which could be realised through development of the ‘optimistic’ Scenario 3 sites. This is a total surplus across the whole EZ of £50.72 Million that represents the development potential of the whole EZ. This represents huge potential but will require up front intervention from the Council to enable delivery of the Scenario 2 & 3 sites and realisation of the new business rates income. These outputs assume that a total funding requirement of £17.96 million to deliver all development options across the lifetime of the EZ. For all scenarios, the assumption has been made that development will not occur if the infrastructure funding package is not delivered. It is assumed that the Council is financing these interventions, and that these costs will be recovered from the rates growth income throughout the EZ period. This can create cashflow requirements where the business rates do not cover the financing costs, and we highlight the ‘peak deficit’ of each scenario in the modelling below so that the Council has an understanding of their maximum borrowing. The Council is committed to the success of the zone, and this is demonstrated by the proposed funding interventions at key schemes such as Four Waterside and The Vulcan Works. These schemes are targeted at growing the Northampton economy by strengthening the town centre office market. Building on the success of the Innovation Centre, these schemes combined will create a varied office accommodation offer to appeal to a wide range of businesses, from those that require the support of the Innovation Centre, through to maturing businesses that require smaller and flexible terms, and larger or mature businesses that will be attracted by the Grade A waterside accommodation at Four Waterside. The Council is progressing its Business Case for significant investment into Four Waterside, which will create a positive surplus to the LEP. Overall, this report has identified the significant success already achieved by the zone and sets out some further work that the Council can progress to ensure that the zone continues to deliver new development, jobs and growth for Northampton and the wider LEP area.
1.3.3. PRIORITY SITES The top priority sites are as follows: • Site 13 – Four Waterside: The development of this site is considered a top priority for the Council to meet its ambitions to strengthen the town centre office market. This site requires EZ funding of £6,245,187 to fund the market rent subsidy, and overall will
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generate a surplus of £1.42 Million over the lifetime of the EZ. This is fairly marginal in the context of the costs associated with delivery. We are aware that the Council is separately progressing an Outline Business Case for the site and intends to commission a delivery and procurement strategy to identify the most appropriate means of bringing the site to the market. • Site 7 – Edgar Mobbs Way: Current assumptions do not include any EZ funding and the site generates a positive surplus of £10.8 Million. If this land was developed we are confident it would be highly attractive to occupiers and investors. As a priority, the Council should engage with the landowner to understand their appetite for the site, and to understand whether any additional information is available as to any site abnormals that could impact the development assumptions made in this report, or whether further site investigation works are required/ proposed. Dependant on the outcome of these discussions, and the nature of any development constraints, the Council could investigate whether the business rates mechanism could be used as a fund source to accelerate development. Using the financial model developed for this study the Council will be able to consider the financial impact of different delivery timescales on the overall outputs of the wider zone. • Site 12 – Railway station car park: This workstream is being progressed and we have been advised that the car park will be delivered in 2021. This site requires EZ funding of £5,000,000, and overall will generate a deficit of -£4.91 Million over the lifetime of the EZ. The model currently assumes that the business rates income generated by the car park will be retained by the LEP, as opposed to being considered a central asset as it is currently. If this proves to be incorrect then the modelling assumptions would need to be revisited. It is worth noting that due to the current car park being on the central rating list, we do not know what the current rateable value it and have adopted prudent income assumptions. • Site 17 – Vulcan Works: This development is also being progressed and we understand the scheme will be delivered in 2021. This site does not rely on any EZ funding and generates a positive surplus of £4.36 Million to the zone. • Site 6 – Wrefords Extension: We understand that the occupier is progressing this application. We recommend that the Council remains in contact with the occupier so that the may offer support as required. This site also does not rely on EZ funding and generates a positive surplus of £0.88 Million for the EZ. Overall, these priority sites require up-front investment of £11,245,187, comprising £6,245,187 to fund the market rent subsidy at Four Waterside and £5,000,000 to fund the capital cost of the Railway Station car park.
1.3.4. NEXT STEPS Delivery of Site 13, 12, and 17 is underway and plans are being progressed. The delivery of Sie 6 is in private sector control. To maximise the overall success of the EZ, it is our view that the Council should focus on developing cases for the development of its industrial sites at Sites 1, 2, 3 and 7, with an emphasis on the delivery of Site 7. As a priority the Council should undertake the following for Site 7: • Detailed discussion with landowner to understand their aspirations for the site and implications on the development assumptions contained in this report, notably around delivery timescales. • Further work to understand development constraints and impact on development assumptions;
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• Development viability and further financial modelling to test the affordability of the development constraints. A development appraisal will identify the funding gap for the site, and then financial modelling can be used to determine whether the EZ model can afford to pay for this gap, i.e. whether site specific scenario produces an overall surplus or a deficit. If the former this forms the basis of a funding ask. Sie 3a also represents a significant development opportunity particularly . Under the current assumptions we have assumed that the site will not be delivered until 2028 due to site abnormals and ownership constraints. We advise that the Council undertakes the following: • Further financial modelling to understand the affordability of the site abnormals in the context of EZ funding, i.e. whether the site is overall a ‘drain’ on the EZ or whether it generates a surplus.
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2. Introduction 2.1. Instruction Cushman & Wakefield has been appointed by Northampton Borough Council to undertake a review of the Northampton Waterfront Enterprise Zone, with a focus on establishing the progress to date within each zone and identifying any barriers to delivery and potential solutions to address them. A priority of the review is to establish what actions Northampton Borough Council and its partners must take to bring sites forward for development. The Council also requires advice on the outputs and economic benefits of work already completed within the Enterprise Zone. To undertake this 2020 EZ review, Cushman & Wakefield has undertaken the following key tasks: • Desktop analysis and baseline review – comprised a desktop study to update our knowledge of progress since the Enterprise zone was established in 2011. • Market assessment – A market facing review of the sites and their local context, taking into account supply and demand dynamics and commentary on the most appropriate development at each site in market terms. • Site specific review – Informed by the baseline review and market review, we undertake a review of development proposals for each site and identify the key issues that are restricting development within the zones and recommendations as to possible interventions that could unlock development. This includes a ‘prioritisation’ process whereby we identify the priority sites and analyse their strengths and weaknesses; • Completed sites – a summary of the completed sites and the benefits already unlocked; • Business Rates forecasting – Based on our market review, we have prepared a forecast of the business rates that will be generated by each of the sites (and cumulatively) which will be retained by the LEP. All forecasting predictions have been carefully considered taking into account any developments that have already taken place on site; • Investment Plan – Analysis of the costs required to bring key sites forward for delivery. Where detailed costs were not available, we have provided high level costings for unlocking these sites. This section will also set out the action plan of the next steps to be taken to bring each priority site forward for funding/ development; • Financial model – The business rates forecast and investment plan will be brought together into an infrastructure and funding model that brings together the overall financial impacts of the EZ across a range of scenarios including at a site-specific level and aggregated for the EZ as a whole. • Concluding thoughts – We summarise the report by providing a summary of the financial model outputs, the benefits of EZ designation making some recommendations around further interventions and delivery of the action plan. Please note that we were advised at the project inception that Stakeholder Engagement was not required for this project.
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2.2. Enterprise Zone Rates Additionality Mechanism Under the EZ regulations, the South East Midlands Local Enterprise Partnership (SEMLEP) is entitled to retain all additional business rates generated within the EZ boundary annually for a period of 25 years. The SEMLEP is entitled to redistribute these business rates across the SEMLEP area according to their economic objectives and priorities. The business rate income therefore, represents an important source of funding for local economic development. However, the scale of this additional funding depends on the delivery, and crucially, the timing of delivery of new development and therefore, business rate income within the EZ boundary. This is because the business rate retention provision is time limited for a fixed period of 25 years, which started at April 2012. As this 25-year programme is already running and diminishing with time, there is extra incentive on LEPs to accelerate the delivery process to maximise the amount of money in the business rate pool. The delivery of development within the EZ is therefore, critical to both unlocking and maximising business rate additionality. Accordingly, some Local Authorities are looking to borrow against the projected business rate income to forward fund infrastructure and enabling works, using prudential borrowing or loan finance from revolving investment funds. This form of Tax Increment Finance (TIF) can be used to unlock barriers to development and accelerate the delivery process.
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3. Market Review Summary 3.1. Industrial Market
3.1.1. NATIONAL MARKET COMMENTARY
PERFORMANCE Unsurprisingly following the outbreak of Covid-19 in the UK, total returns dipped in March across all the main commercial property types according to MSCI’s UK Monthly Property Index. Total annualised returns for Distribution Warehouses fell to 5.2% in March, from 6.7% in February, on the back of a 1.3% monthly decline in capital values. As a result, the performance gap with offices (5.3%) has closed to just 130 bps, while retail continued its slide in negative territory (-9.7%).
ECONOMY Latest PMI readings suggest that the economy is headed for a sharp recession. The UK composite PMI fell to a survey record low of 37.1 in March, while the Manufacturing PMI slumped again in contraction territory (47.8). In response, the government and the Bank of England have approved a range of financial assistance measures aimed at supporting business and their employees. At its special meeting on March 19th, the Bank of England’s Monetary Policy Committee (MPC) voted to increase its holdings of government and corporate bonds (Quantitative Easing, QE) by £200bn to a total of £645bn, reduce the Bank Rate by 15bps to 0.1% and to enlarge the Term Funding scheme for small and medium-sized enterprises (TFSME). Another funding scheme is the Covid Corporate Financing Facility, giving the BoE the mandate to buy bonds from companies meeting certain creditworthiness criteria. As a result of COVID-19, Oxford Economics now expects the UK economy to shrink by 5.1% over the year, followed by a strong rebound next year (+6.0%).
DEMAND AND TAKE-UP The material uncertainty created by the COVID-19 pandemic and the practical implications of the government-imposed lockdown (including the ability to carry out inspections unless for “essential” business) have had an undeniable impact on the UK logistics market. While some long-term strategic requirements are still progressing, many have been put on hold and overall new enquiries were down in March. The main beneficiary so far has been the short-term market, with several occupiers including supermarkets and e-commerce looking for expansion space to cope with online demand, either through their network, 3PLs or “pay-as-you-go” warehousing. Tesco for example has temporarily re-taken possession of two recently vacated properties in Middleton, North West (300,000 sq ft) and Milton Keynes (620,000 sq ft) to deal with a spike in orders. Strong demand has also been seen from the public sector looking to deal with the health impacts of the pandemic. Due to the volume of demand, some landlords are now considering letting their space on a short- term basis. That said, even e-commerce is being disrupted, with some retailers operating in “non- essential” sectors such as fashion (e.g. Next, TK Maxx and River Island) temporarily closing their online operations in response to employees’ security and health concerns. Unsurprisingly, the number and volume of deals was down during Q1, with 5.5 million sq ft transacted across 41 deals. This represents a 32% and 21% decline compared to the 10-year average.
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Before the market went quiet in March, two large deals completed: the letting of the former Poundworld unit (546,970 sq ft) in Wakefield to The Range, and the letting of the largest speculative development in the North, 525 Haydock in Haydock (525,300 sq ft) to Kellogg’s, for £6.30/sq ft/annum. Further south the country, Amazon exchanged contracts for a new 91,493 sq ft delivery hub near Ipswich in February. The e-commerce giant is also understood to be under offer on a number of large units and land plots, demonstrating the continued demand emanating from e-commerce. In March, online sales reached a record high of 22.3% of total retail sales.
AVAILABILITY AND DEVELOPMENT Availability continued its upward trend, driven by a combination of speculative development and second- hand space returning to the market. Over 72 million sq ft was being marketed at the end of Q1, unchanged during the quarter but up by 22% on the last year. This amount includes 4 million sq ft of ongoing speculative space at the end of March, and another 2.5 million sq ft that PC’d during Q1. This compares to 5 million sq ft of speculative completions per annum over the last 10-years on average, and a peak of 14 million sq ft seen in 2019. While construction paused for 5-10 working days at the start of lockdown, a number of sites are now active again, albeit with new safe working practices in place. At the end of Q1, London/South East/East accounted for largest share (40%) of committed speculative space. New pockets of development have emerged across the region in response to robust occupier demand. For example, BentallGreenOak Advisors are bringing forward Gateway 385 (385,000 sq ft) and Gateway 266 (266,000 sq ft) at Gateway Peterborough. Oxfordshire is also seeing more activity, with 310,000 sq ft underway across 2 units at Didcot Quarter, and 210,000 sq ft at Frontier Park in Banbury. While the rate of Grade A supply growth slowed lately (+12% y-o-y compared to +35% in Q1 2019), recent business bankruptcies/insolvencies have contributed to a 32% surge in available second-hand Grade B/C over the same period. The largest unit recently returning to market is Quinn Radiators’ industrial complex (1 million sq ft) at Imperial Park, Newport, Wales. The former 301,696 sq ft Mothercare DC at DIRFT, East Midlands, is now also on the market. This rebalancing between new built and second-hand space is likely to continue going forward. As far as the regions, the North East and the North West were the only regions to register a fall in availability on annual basis (-12%). In the North West, this is on the back of a good Q1, with many long term speculative voids filling up.
RENTAL GROWTH Prime headline rents were largely unchanged during Q1, with the C&W prime rental index rising by 0.3% for both Big Boxes and smaller units between 50-100 sq ft. At the end of March, ERVs were respectively 1.5% and 1.7% higher than the corresponding period last year. While prime rental growth has slowed, speculative development continues to test headline rents in submarkets with favourable demand/supply dynamics. Within the M25, in particular, there are several developments in the pipeline that will set the rental tone for urban logistics-type of assets, including Panattoni Borehamwood (148,795 sq ft), quoting £16/sq ft/annum, and Unit 8 at SEGRO Park Tottenham (50,050 sq ft), quoting £18/sq ft/annum.
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INVESTMENT AND PRICING The COVID-19 pandemic is also being felt in the investment market. Very few sales have been launched over the last weeks. Apart from a limited number of sale and leaseback transactions (a trend which we expect to continue in the short term) C&W estimate that ~50% of deals agreed prior to COVID-19 have been put on hold/ bidders have fallen away. Preliminary figures from RCA shows L&I investment was on a par with Q1 last year (£1.6 billion). However, when entity deals are stripped out of the total, including Blackstone’s purchase of Hansteen, volumes are down by nearly 40%. Nonetheless, it is encouraging to see that some deals agreed prior to lockdown have progressed and we are aware of 15 deals that have now completed in March/April. Active buyers include Blackstone, Urban Logistics REIT, with limited activity to date from UK Funds/domestic buyers. For example, two strategic assets recently brought to market in Trafford Park, Manchester, and Perivale, West London, have attracted significant interest with bids well above asking levels. In a sign of optimism, Blackstone have recently completed on a 22-asset portfolio (Cara Portfolio) owned by Clearbell for £120m. Due to lack of fresh evidence, it is too early to tell how the crisis may have impacted pricing. If anything, it is likely to accelerate the ongoing “flight to safety” and polarisation in pricing between primary and secondary/tertiary assets. Debt buyers will undoubtedly be impacted in the short term by the reduction in availability of bank finance and/or changes to LTV ratios/margins which could adversely affect pricing in their pricing models. Meanwhile, due to COVID-19 many landlords are faced with occupiers demanding some form of rent payment relief/deferral, which will require compromise on both sides. Investors will continue to monitor how these concessions and lower rent collection rates may impact cashflows and debt covenants. The latest financial reports seem to suggest that most of the larger specialist players have enough headroom in their balance sheets to weather a short-term fall in income and a modest fall in value before breaching bank covenants. In the short-term cash buyers will be king. Some retailers, including Next and Topps Tiles lately, are eyeing Sale & Leaseback of their freehold industrial estates to raise cash and mitigate the current/future impact of the coronavirus pandemic on their business. In conclusion, investors still believe in the fundamentals of the sector and there is significant capital waiting for pricing discovery to determine their next move. At the moment, there is limited evidence of distressed sellers with vendor's aspirations remaining at pre-COVID-19 levels. A number of potential sales have been put on hold until the summer/autumn.
3.1.2. LOCAL MARKET COMMENTARY
LEASING Vacancies in Northampton's industrial market have loosened over the past few months, following a wave of new speculative deliveries across the market. Totalling around 2 million sq ft in 2019, this new speculative supply has applied upward pressure on vacancies in this time, lifting them off low levels. While this movement has been notable, vacancies in the market remain tight at around 4.5%. Heading into mid-2020, the impact of the coronavirus on the market is still emerging, but a slowdown in leasing activity is expected in the coming months. This may see vacancies start to move out further, though with construction impacted the overall impact could be minimal. There is also evidence that the measures put in place to mitigate the spread of the virus have seen online
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sales and e-commerce ramp up, with some agencies reporting a surge in demand for short-term space. This could prove to be beneficial for landlords looking to fill any currently available space. Net absorption in 2019 was concentrated in Corby, with the majority of sizeable move-ins taking place there. These include BSH Home Appliances moving into 950,000 sq ft and Eddie Stobart taking 850,000 sq ft at the newly built Midlands Logistics Park in Q4 2019 and Q1 2020, respectively. Furthermore, Advanced Supply Chain Group moved into 250,000 sq ft at Weldon North Industrial Estate. Elsewhere, Morrisons moved into nearly 400,000 sq ft at Prologis Park Pineham in Q1 2019, and Eddie Stobart took occupation of 300,000 sq ft at Panattoni Park straight after completion in Q4 2019. The haulage firm is increasing its floor size space in the area to service new contracts.
CONSTRUCTION Northampton's connectivity to the rest of the UK means that it has a deep-rooted status as pivotal logistics hub. Developers have been confident in attracting occupiers for speculative schemes, particularly at the Midlands Logistics Park. Most speculative stock in the past year was let upon completion. The largest delivery in recent months was a circa. 1 million sq ft unit at Midlands Logistics Park in Q3 2019, which was fully let by BSH Home Appliances. Within the same park, another unit (850,000 sq ft) was delivered last year, which was preleased back in May 2018 to Eddie Stobbart. Currently, with more than 2 million sq ft under construction, Northampton is one of the busiest markets in terms of development in the UK. Most activity is concentrated in Midlands Logistics Park, Panattoni Park and DIRFT III in Daventry. However, the impact of the coronavirus could see deliveries delayed as reduced staff and a possible government shutdown could hamper activity.
SALES Northampton enjoyed a strong year of industrial investment in 2019. With volumes of nearly £500 million, 2019 was the strongest investment year in Northampton this cycle. Although investor sentiment towards the industrial sector remains positive overall, coronavirus related uncertainty may dampen trading in the months ahead. Most sales volume in 2019 was attributed to the sale of Tudor portfolio to Thor Equities in December for £241 million. The portfolio comprises seven logistics properties, two of which are located in Northampton. These include Warth Park and DIRFT in Daventry. Another notable portfolio sale last year was the acquisition of three industrial units in Panattoni Park, where Gazeley Holdings acquired the units for nearly £80 million in July 2019. Investors are targeting distribution centres across Northampton given the sector's positive supply/demand dynamics amid strong growth in online spending. Strong rent growth and tight vacancies have drawn in both institutional investors and REITS, which have made up the majority of purchases. For instance, Tritax Big Box REIT forward funded the development of Eddie Stobart's distribution centre in Midlands Logistic Park in February 2018 for £87.3 million. More recently, Warehouse REIT acquired John Lewis distribution centre in Brackmills Industrial Estate for £29 million in April 2019. Average pricing of industrial assets in Northampton has increased. In fact, prices have risen nearly 40% from 2013. The average sale price per sq ft in Northampton is £76, making the highest in East Midlands. Prices in neighbouring Leicester are £73/sq ft. On a submarket level, the highest prices are paid in Northampton Core (£78/sq ft) and the lowest in Kettering (£71/sq ft).
3.1.3. ENTERPRISE ZONE DYNAMICS Northampton’s industrial market remains strong, and its excellent connectivity continues to support its popularity as a logistics hub. We consider a number of EZ sites as classed classes as
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‘industrial’ sites, including sites 1 – 11, 14 and 20. The proximity of these sites to the town centre means they will be more suitable for light industrial uses, with demand predominantly from local manufacturing and potentially some trade counter uses. The sites on the whole have good access to the local road network, and the sites with good road-side prominence could also attract demand from roadside uses such as car dealerships or F&B drive-thru operators. The sites vary in nature in terms of their size, capacity, location and ease of delivery. This can be seen as a positive, in that it provides an opportunity to meet the needs of a wide employment market and deliver a pipeline of sites to meet the immediate and future employment needs of the borough. In order to determine which sites could have the most significant impact on the EZ through early delivery, we have had regard to the following issues that impact our view on how the sites should be prioritised: • Access & connectivity - The western side of the town centre has the strong road connections to the road networks, and we expect that demand for these sites will be strongest (Sites 1 – 11). In prioritising delivery of the sites, we therefore propose that the western sites are considered a priority over the sites to the east of the town centre (Sites 14 and 20). • Site delivery – The timeline for occupiers from initial idea to move means that sites must be ready for immediate development including infrastructure, clean and level site with services and outline planning in order for fast track delivery of buildings to meet the needs of occupiers. As such sites that can be brought forward for immediate development should be prioritised, for instance those sites with fewer delivery constraints such as flood zone issues, access, existing development on site, etc. Occupants usually require a maximum lead time of 18 months ideally. • Site assembly – With the exception of Site 3 (which is owned by the Council), we do not have information on site ownership and have been informed by Northampton Borough Council not to make contact with the landowners until a later date. Therefore, we are unsure whether the sites are in the ownership of willing parties. It will be important to determine this as this will have a significant impact upon decision making around site prioritisation as well as whether the Council should intervene in site assembly. • Existing development – We have determined that a number of the sites are not appropriate for further development. These include: o Site 3b – in use as a recycling centre with no further land available for development; o Site 3d – existing light industrial works well in this location and meets market demand for older, cheaper accommodation; o Site 3e – location of Sixfields Stadium with no further development potential o Site 4a – Currently marked out and used as sports pitches so unlikely to be straightforward in delivery terms; o Site 4b – Comprises land around the Northampton Saints Rugby Football Club stadium and not suitable for development; o Site 4c – Already developed as National Lift Tower with no further land available for development; o Site 5a & b – no further land appropriate for development; o Site 7d – entrance to a nature reserve and deemed inappropriate for development; o Site 8 – fully developed with no further land available for development; o Site 9 – fully developed with no further land available for development; o Site 10 – fully developed with no further land available for development; o Site 11 – fully developed with no further land available for development; o Site 20 a & b - fully developed with no further land available for development;
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o Site 20c – currently occupied by Carlsberg, limited development land available and unsure of any plans for Carlsberg to develop further on remaining space. Based on the above, we are the view that the following sites offer the strongest potential for industrial development: Site 7 (a, b & c), Edgar Mobbs Way – Extending to 6.8 Ha (16.8 acres), the shape and size of site 7 is considered suitable for the development of buildings in the region of 30 – 40,000 sq ft. The site is considered relatively straightforward in delivery terms as it is not impacted by flood zone issues as a number of other sites. This site should, therefore, be considered a Phase 1 site and we anticipate that the site could be fully developed and occupied by 2022. We anticipate that Site 3 and site 7 would complement one another as opposed to being in competition. Site 7a could be brought forward first, following by Site 7b and then site 7c. It is possible that the remaining developable land at 7c will be delivered first, as planning permission was granted in October 2019 for the development of a waste transfer station. Site 1, Upton Way – The site is considered challenging given the extent of the developable area that is impacted by the flood zone. This will impact the development capacity of the site and given the shape of the land outside of the flood zone we would anticipate Site 1 being suitable for development of circa 5,000 sq ft industrial units, with land in the flood zone being used for parking areas. Site 2a & b – The 1.8 Ha (4.45 acre) site should be considered a ‘gateway’ into the area and should be prioritised for delivery. The site will accommodate buildings of a similar size to Site 7, and there is a risk that if these sites are developed concurrently, they will compete with one another and restrict demand. Given the flood risk issues with Site 2a (see Appendix B for a detailed site description), we propose that delivery of this site is delayed to follow occupation of Site 7. We have assumed occupation in 2025 so as not to compete with Site 7. Given the site’s prominence and flood risk issues this could potentially be a good site to consider whether the Council is able to intervene in its delivery and discussions with the landowners should commence asap. There is a small risk that a private sector developer may acquire the site and pursue development of the higher value uses to the frontage only, risking non-delivery of the rear of the site. We have experience of this with other EZ sites, and whilst it can be dealt with through the planning system, this could lend weight to a future argument to acquire the site, subject to further work being undertaken to understand the affordability and viability of the scheme. Site 3a, Sixfields – Site 3a at 4.2 Ha (10.37 acres) offers a regular shaped site that is suitable for a range of larger industrial units from 25,000 sq ft to 75,000 sq ft to maximise development of the site. However, we are aware that whilst this land is owned freehold by the Council, the football club own the long leasehold, which would need to be resolved in order for development to commence. Furthermore, the wider site (incorporating the former Athletics Ground, Site 3b and 3c) also has abnormal, enabling & remediation issues estimated at £13 million, which will negatively impact the viability of the site. To reflect this, we have pushed the delivery timescales out to 2028. Having regard to the above, the following table summarises our view on the development capacity and take up of these sites:
Site Ref Building size Annual take up First Occupation
30,680 ft² Site 7 (a,b,c) 40,000 ft² 2022
5,000 ft² Site 1 35,000 ft² 2024
37,050 ft² 37,050 ft² Site 2 (a & b) 2025
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48,000 ft² 50,000 ft² Site 3a 2028
Given the prominent location in established industrial areas we see these sites being able to compete with other sites available in the area, and their access in particular to the local road network will see them deliver occupiers, create employment and generate long term success for Northampton.
3.2. Office Market
3.2.1. NATIONAL MARKET COMMENTARY ECONOMY The measures taken to control the spread of Covid-19 are expected to have a significant negative impact on the UK economy. Forecasts suggest that the introduction of social distancing measures and the impact on supply chains is likely to cause the UK economy to enter recession in 2020. There is considerable uncertainty surrounding how long restrictions might remain in place. However, once the restrictions are lifted a strong rebound is expected in 2021, with forecasts suggesting the economy will grow by 6.0% driven by loose fiscal spending and stronger consumer spending, while inflation should stay low. OCCUPIER FOCUS In the UK regions, occupier take-up remained stable from the previous quarter at 1.3 m sq ft, broadly in-line with the five-year average and 10% above the 10-year average. In London, take-up in the first quarter fell to 2 million sq ft, 33% below the five-year quarterly average and more than 20% below the same quarter last year. Despite this, there remained 3.7 million sq ft under offer at the end of Q1 2020, higher than the same point last year, and 28% above the five-year quarterly average. Availability in Central London remained stable from the previous quarter’s level at 13.6 million sq ft and broadly in line with the 10-year quarterly average. Although supply has increased year-on- year, the vacancy rate remains relatively low at 4.9%. In the UK regions availability also remained stable at 7.8 million sq ft, one of its lowest levels since 2006 and 17% below the five-year average. In all markets, prime rents either remained stable or increased. The majority of UK markets are expected to see a significant decrease in leasing activity in the second quarter as the effects of Covid-19 measures become apparent. INVESTMENT FOCUS UK office investment turnover fell to £3.6 bn in the first quarter, the lowest since 2013. A lack of stock continued to weigh on activity, although investor demand remains strong. Overseas investors accounted for 74% of purchases in the first quarter, well above the average of 61% over the last five years. Pricing remained stable in the majority of markets. We anticipate turnover to be limited in the second quarter making price discovery much harder.
3.2.2. LOCAL MARKET COMMENTARY
LEASING Northampton's office fundamentals have been robust over recent years. Absorption has outpaced deliveries over the past few quarters, which coupled with the lack of new development, caused
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vacancies to compress significantly, reaching an all-time low in Q1 2020. However, the recent coronavirus outbreak threatens to derail the dynamics of a market that started off strong in 2020. The demand in out-of-town submarkets rebounded in early 2020, after years of weak performance. Northampton's tenant mix has become more dynamic in recent years, expanding beyond traditional business services and occupiers to public bodies as well. Despite slowing demand in 2019, there were some notable deals that year, such as Multimatic Motorsport moving into 30,000 sq ft at Arrow Park. Activity in 2019 was concentrated in the Northampton Central Submarket, with the majority of deals taking place there. Aside from the coronavirus crisis, future demand is expected to be adversely impacted by the government decision to create an HMRC-led hub in Birmingham by 2020. This will result in the closure of several regional tax offices, including Princess House and Northgate House in Central Northampton.
RENT Fuelled by strong demand and falling vacancies, rental growth took off in 2015. Though annual gains peaked just above 12%, compared to about 15% in London, Northampton has maintained growth, while rents have been falling in London for more than two years. Within Northampton, growth does not vary greatly as rents are growing around 2% in all submarkets. On the prime end of the market, rents can be as high as £17/sq ft. Nevertheless, at just over £13/sq ft, Northampton is one of the most expensive markets in East Midlands, after Nottingham. On submarket level, rents do not vary greatly in Northampton. South Northamptonshire and Kettering is where the highest rents are paid, standing at around £14/sq ft. This is around 20% higher than the average rents paid in the least expensive submarket, Northampton Central. Furthermore, the gap between Grade A and Grade B offices has widened over recent quarters, with rents in the former more than £4/sq ft higher than the latter. Today, the incentive to build new offices or refurbish older space to a higher specification is much higher alongside the demand for better-quality space, which provides weight to Council aspirations for new Grade A development.
CONSTRUCTION With only about 10 million sq ft of office stock, Northampton is the second smallest office market in the wider East Midlands region. After years of very little supply, development activity returned in Northampton in 2017. The return to positive territory was largely thanks to construction work on Northamptonshire County Council's new 150,000 sq ft ‘One Angel Square’ headquarters completing in Q4 2017. Prior to that, the last substantial delivery was the 92,000 sq ft Cube development in Corby in 2010. Construction momentum continues in Northampton, with the Waterside office park. Around 85,000 sq ft of office space was delivered in February 2020, making it one of the largest deliveries in the market in recent years. Furthermore, refurbishments have been popular, filling the supply void left by the lack of new development. As a result of the council's consolidation into One Angel Square, the formerly occupied Century House and Riverside House are set to be upgraded in the coming quarters. At the same time, overall, the market has actually lost stock due to demolitions and conversions to other uses. Northampton has lost over 184,000 sq ft of office space since 2013. Some examples include Crown House in Corby and Castle House in the city centre.
SALES Office investment in Northampton has been trending downwards of late. With less than £50 million deployed in 2019, sales are down sharply on the £150 million traded a year earlier. This
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downward trend in sales will likely continue in the near term as the full scale of the effects of the coronavirus outbreak impedes transactional activity and makes valuations difficult. Core-plus opportunities are rare in Northampton due to the absence of prime stock, with most investors targeting value-added properties. For instance, Lakeside House in the Northampton Fringe Submarket sold for £18.8 million, reflecting a net initial yield as high as 10.3%. The property is mostly occupied by Travis Perkins and Novacroft. Similarly, 5 The Lakes sold for £15.7 million to Bracknell Forest Borough Council in November. However, few prime offices were traded in 2018. Firstly, Barclays purchased its own Northampton headquarters (310,000 sq ft) for £60.1 million in January, committing its long-term future to the market in the process. Then, in April 2018, Northampton County Council agreed to a sale-and- leaseback deal on its One Angel Square headquarters (150,000 sq ft) to Canada Life for £64 million.
3.2.3. ENTERPRISE ZONE DYNAMICS Northampton’s strength has a logistics hub means that proximity to the M1 is key, and this has had a significant impact on the nature of the office market. Indeed, The Northampton office market is dominated by out of town parks and a significant proportion office accommodation is ancillary to industrial occupation. In turn, Northampton does not have a strong or definable town centre market. Northampton Borough Council has identified this market failure and set out ambitious proposals to intervene and develop a strong town centre office market to help grow the economy. Development viability is a key challenge in the delivery of new office accommodation. It is generally considered that rental levels of in excess of £20 sq ft are required for viable development. Local agents have reported prime rents for brand new out of town accommodation (such as The Lake Business Park) are achieving circa £20 per ft², with refurbished stock more likely to achieve £15 per ft². Where stock has been on the market for a long-time rental values currently sit between £8 -12 per ft². Rental values within Northampton town centre achieve on average 20% lower values than out of town office space. There are 4 sites in the EZ that include proposals for additional office development: • Site 13, Four Waterside – Council owned 1.69 Ha (4.18 acre) site with proposals for 50,999 ft² office accommodation, 128 bed hotel and 93 residential units. • Site 17, Vulcan Works – The creation of 67 co-working office units, specifically designed with start-ups and growing businesses in mind. • Site 18, Swan Street – a mixed-use scheme consisting of 7,620 ft² commercial leisure accommodation, 13,450 ft² office accommodation and 7,750 ft² residential accommodation. • Site 16, Horizon Park – Conversion and extension of the former Gaslight Billing Trading Centre to create Grade A Office accommodation. The most notable development and ability to impact the market is undoubtedly at Four Waterside. The site is in Council ownership and so provides a significant opportunity for the Council to invest in its office market and its EZ. Without public sector intervention, Four Waterside will not be delivered, The Council has prepared a draft OBC for the site that sets out an ambition to forward fund 50,000 sq ft of office accommodation, a 128-bed hotel and 93 residential units. There are challenges associated with this, most notably around viability and demand for both the hotel and office uses. Construction is currently underway at Site 17, Vulcan Works. The site is situated in Northampton town centre, and it is our view that the size and nature of accommodation proposed will be generate strong demand.
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Swan Street and Horizon Park are both within the Council’s control and development proposals are in the early stages. Both schemes can be considered high risk given the location and nature of development proposed and further work will be required to understand whether these schemes are viable and fundable. The longer timescales associated with bringing these schemes forward fits in well with wider office development proposals that are aimed at growing the town centre market and which in turn will hopefully increase demand for these schemes and support viability and deliverability. These developments as a whole complement one another and, along with the successful Innovation Centre, provide a range of accommodation types to promote a healthy town centre office market.
3.3. Retail Market
3.3.1. NATIONAL MARKET COMMENTARY Retail is undergoing major disruption fuelled by a set of powerful technological, social, demographic, and economic forces. The rise of the Internet means that the store’s role in the consumer’s ‘path to purchase’ has changed. The most obvious sign of this has been the growth in online sales as a share of the total, which now account for 20% of retail sales in the UK. Most analysts believe that online share of the total will continue to grow, with some believing that the majority of retail sales could eventually be online. We believe that a figure of 35% is more likely at which point it will remain. There will be further store closures and portfolio restructuring. Across Europe, online penetration tends to be lower than in the UK – ranging from 3-18% – although online continues to take an increasing share of the total in all markets. It is worth pointing out that the current retail revolution is not the first significant change that the sector has experienced. If we look back, the advent of self-service, the rise of supermarkets and department stores which led in turn to the growth of shopping centres and the entire retail distribution model in many societies. These developments fundamentally changed the way in which we shop for goods and services. Prime rents have fallen by 59% in real terms over the last 11 years, with no real rental growth in any of the 250 retail locations surveyed. Compared to last year, rent as a proportion of comparison spend has fallen from 12.8% to 10.2%, which is an indication that rents are beginning to adjust to more sustainable levels. As a generalisation, larger city centres and dominant shopping centres/ retail parks will prove more resilient, while the most adverse impact will be on tertiary and secondary parts of the market, notably secondary high streets and schemes. Food also remains a relatively ‘defensive’ sector, given consumers’ propensity to shop in-store rather than online. While online food sales will likely increase from their current low base, we do not expect a rapid shift to online food shopping. In any case, even with a shift to online shopping, most large food stores could still function as ‘last mile delivery’ hubs, given their close proximity to large numbers of people. Convenience retail will also remain relevant. Consumers will always want to do a ‘top up’ grocery shop at their local store, while commuters will want to pick up a bottle of wine as they battle through the crowds at the railway station on their way home.
3.3.2. LOCAL MARKET COMMENTARY
LEASING Aside from a few quarters when store closures pulled net absorption negative, demand has stayed positive in Northampton recently, in contrast with the sluggish levels that have been
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recorded in most UK retail markets. Leasing new units such as Cineworld's move into 145,000 sq ft in Rushden, and supermarkets backfilling empty units such as Sainsbury's move into 97,000 sq ft in Wellingborough have boosted net absorption. However, heading through 2020, the sector faces its biggest challenge yet, as potential occupiers, landlords, developers and lenders face headwinds from the impact of the coronavirus outbreak and consumer spending is hit by restrictions on movement. These measures are likely to result in more permanent store closures and difficulties for some occupiers, making it possible there will be upward pressure on vacancies in the near term. However, prior to the coronavirus crisis the market was not immune to the struggles of retail closures and CVAs, including the closure of a Toys R Us location in Weston Favell, a Marks & Spencer on Abington Street in the city centre and a Maplin store in Becket Retail Park. In addition, Toys R Us moved out from its 44,000-sq ft location at St James Retail Park in Q2 2018.
RENT The average retail rent in Northampton has been falling in recent quarters but has varied greatly across the different retail subsectors and locations. Growth has likely been impacted by the mix of retail closures and openings and the relatively slow pace of backfilling empty spaces. There is potential for future growth in prime streets and centres in central Northampton situated near large residential and office schemes. However, the ongoing coronavirus crisis is expected to delay this potential growth as the economic activity slows down in 2020 across the UK. Some of the highest asking rents are in Northampton Core and in prime shopping centres like Grosvenor. For instance, Pandora signed a 2-year lease in Q3 2018 for a 1,400-sq ft unit at Grosvenor for £78,600 per annum (£56/sq ft). The Northampton Core Submarket has some of the highest rents in market, led by shops in the city centre and high-end shopping centres like Grosvenor. Average retail rents across the city centre are around £20/sq ft.
CONSTRUCTION The Northampton Market contains around 14 million sq ft of retail space. Around two-thirds is classed as general retail, with around 4 million sq ft situated within shopping centres and retail parks. The largest shopping centre is the Grosvenor in the city centre, which extends over 400,000 sq ft. Other large shopping centres include Swansgate Centre (300,000 sq ft) in Wellingborough and Weston Favell Shopping Centre (300,000 sq ft) and Sol Central (200,000 sq ft) in Northampton. Prime streets in the city centre include Abington Street, St Giles Street and Gold Street. After a quiet period following the financial crisis, construction picked up in 2017. Extending existing shopping centres or parks has been popular in recent years, with many owners and developers preferring to lean on the popularity of existing centres rather than building brand-new schemes. For instance, in 2017, six additional units were built at Kettering Retail Park. More recently, an expansion at Rushden Lakes Shopping Centre in Northampton took place in 2019, comprising 15,000 sq ft of retail space.
SALES Investment volumes in Northampton retail property slowed down over the past three years in tandem with investor sentiment towards the retail sector in general. This downward trend is expected to continue in the near term in the wake of the coronavirus outbreak. Although trading has slowed of late, the market's retail parks remain relatively popular with investors, highlighting the importance of the leisure element in today's retail market. In February 2018, Warehouse REIT purchased St James Retail Park for £27.5 million from Hansteen Holdings. Supermarket acquisitions have been particularly popular. For instance, Realty Income Corporation purchased a Sainsbury's supermarket from British Land for £15.6 million in May
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2019. Investors' interest in shopping centres has decreased of late, with the focus turning towards retail and leisure parks. Furthermore, investment has been focused on the Northampton Submarket, accounting for most of the market's sale volumes over the past 12 months. The last major trade on the high street was BMO Real Estate Partners' acquisition of 8-18 Abington Street in Northampton for £5.2 million in March 2016, reflecting an 8.9% yield.
3.3.3. ENTERPRISE ZONE DYNAMICS There is no retail development currently proposed for the EZ. Whilst the 2005 masterplan for Freeschool Street at Site 14 contained 13,000 ft² of retail accommodation, this is now considered inappropriate in the current market. The Freeschool Street Site has a strong supply of low-quality small convenience stores in the immediate area surrounding the site and so we do not foresee the scheme requiring a convenience offer. Similarly, retail accommodation space is provided predominantly along Mare Fair and Gold Street. The site is also well supplied by supermarkets, with the closest supermarket being Lidl, just 0.4 miles away, with a number of other supermarkets within a mile of the site.
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4. The Northampton Waterside Enterprise Zone sites 4.1. Introduction The Northampton Waterside Enterprise Zone was granted its Enterprise Zone Status in 2011. The Enterprise Zone comprises 120 Ha of brownfield land along the River Nene. The zone consists 21 main sites in total. A map showing the location and name for each site can be found at Appendix A and a detailed description of each of the EZ sites can be found at Appendix B.
4.2. Site summary Based on discussions with the Council, C&W’s own market knowledge and the market review undertaken at Section 2 above, the sites can be grouped as following according to the proposed/ most suitable development type:
4.2.1. MIXED USE SITES Mixed use development is proposed at the following sites: • Site 13 – St Peters Way (Four Waterside & Northampton University Innovation Centre) • Site 18 - Albion Place (Premier Inn Hotel and Swan Street) • Site 12 - Northampton Railway Station Please note that only development that generates business rates has been included in our modelling.
4.2.2. OFFICE DEVELOPMENT SITES Office development is proposed at the following sites: • Site 17- Project Angel (One Angel Square and The Vulcan Works) • Site 16 - National Grid Site (Horizon Park)
4.2.3. INDUSTRIAL DEVELOPMENT SITES Industrial development is proposed at the following sites: • Site 1 – Duston Mill Lane • Site 2A - Upton Way • Site 2B - Upton Way • Site 3A - Sixfields • Site 6 - Wrefords - Owned by owner occupier who have secured planning consent to deliver a new 1500 m² warehouse for their own operations. • Site 7A - Edgar Mobbs Way North • Site 7B - Edgar Mobbs Way • Site 7C - Edgar Mobbs Way South (2.1 Hectares) – 3,948 m² industrial unit completed in 2017, with planning permission for a 1434 m² waste transfer station. Following the development of this, we do not believe there will be any further land available for development.
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4.2.4. RESIDENTIAL DEVELOPMENT SITES Residential development is proposed at the following sites. Please note that these do not generate business rates and so have been excluded from our modelling: • Site 13 - Residential Development at Four Waterside (93 Units) • Site 14 - Freeschool Street (Proposed apartment development) • Site 19 – St John’s (Student accommodation)
4.2.5. NO PROPOSED DEVELOPMENT A number of sites are either already fully occupied or following the market review it has been assumed that there is a low likelihood of further development within the lifetime of the EZ. These sites are also excluded from our modelling. These include: • Site 3b – in use as a recycling centre with no further land available for development; • Site 3c – small strip of land adjacent to recycling centre with no development potential; • Site 3d – existing light industrial works well in this location and meets market demand for older, cheaper accommodation; • Site 3e – location of Sixfields Stadium and former Athletics stadium. We understand that the Stadium site has no further development potential, and the Council has been looking at development on the Athletics site but contamination and other abnormals impact development viability. This site has therefore not been modelled; • Site 4a – Currently marked out and used as sports pitches so unlikely to be straightforward in delivery terms; • Site 4b – Comprises land around the Northampton Saints Rugby Football Club stadium and not suitable for development; • Site 4c – Already developed as National Lift Tower with no further land available for development; • Site 5a & b – no further land appropriate for development; • Site 7d – entrance to a nature reserve and deemed inappropriate for development; • Site 8 – fully developed with no further land available for development; • Site 9 – fully developed with no further land available for development; • Site 10 – fully developed with no further land available for development; • Site 11 – fully developed with no further land available for development; • Site 15 - St Peter’s Car Park – well utilised operational car park; • Site 19 - St Johns – Fully developed as student accommodation; • Site 20 a & b - fully developed with no further land available for development; • Site 20c – site has been developed with no further development potential; • Site 21 a, b & c – Part of University Campus has been developed with no further development potential.
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4.3. Development assumptions Based on the above we have set out below our assumptions on the development potential for each site, which in turn informs the modelling:
4.3.1. MIXED USE DEVELOPMENT SITES
Site ref Site name Site Area (Ha) Use Total development m² (ft²)
12 Northampton Railway 5.4 Ha Commercial units & 369 m² (3,972 ft²) Station car park 1300 space multi storey car park.
13 St Peters Way – 1.21 Ha Innovation Centre 608 m² (6,544 ft²) Innovation Centre (Offices)
13 St Peters Way – Four 1.69 Ha Offices* 4,738 m² (51,000 ft²) (NIA) Waterside Hotel 20,000 m² (GIA) Residential 7,800 m² Total
18 Albion Place – 0.4 Ha Hotel 104 Rooms Premier Inn and Swan Commercial Leisure 708 m² (7,620 ft²) Street Development Office 1,250 m² (13,450 ft²) Residential 720 m² (7,750 ft²)
*Net internal area, areas taken from draft Outline Business Case
4.3.2. OFFICE DEVELOPMENT SITES
Site ref Site name Site Area (Ha) Use Total development m² (ft²)
16 National Grid Site 4.1 Office 2,323 m² (25,004 ft²) (Horizon Park)
17 Project Angel (One 0.48 Ha Office 17,845 m² (192,082 ft²) Angel Square)
17 Project Angel (Vulcan 1.22 Ha Office 3,461 m² (37,254 ft²) Works)
4.3.3. INDUSTRIAL DEVELOPMENT SITES
Site ref Site name Site Area (Ha) Use Total development m² (ft²)
1 Duston Mill Lane 3.3 Ha Industrial 9,755 m² (105,001 ft²)
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Site ref Site name Site Area (Ha) Use Total development m² (ft²)
2A&B Upton Way 1.8 Ha Industrial 9,913 m² (106,703 ft²)
3A Sixfields 4.2 Ha Industrial 17,838 m² (192,007 ft²)
6 Wreford’s 1.2 Ha Industrial 1,500 m² (16,146 ft²)
7A&B Edgar Mobbs Way 4.7 Ha Industrial 19,952 m² (214,762 ft²)
7C Edgar Mobbs Way 2.1 Ha Waste transfer station 1,434 m² (15,435 ft²) South
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5. Successful Development to Date
The Northampton Waterside Enterprise Zone is “open for business” and has seen a number of successful developments since its inception in 2012. In total, 50,126 m² of new development has been completed, creating a total of 2,388 jobs. This will act as a catalyst for future change and highlights the benefit of being located within the EZ. We summarise these success stories below.
5.1. One Angel Square at Site 17 One Angel Square, completed in 2017, provides a brand new 17,845m² office headquarters building for Northamptonshire County Council. The project has enabled the consolidation of 12 buildings into a single HQ building. Centred around a brand new public square, the scheme provides an attractive BREEAM excellent office building that has since won the RIBA East Midlands Award 2018. The judges stated that “One Angel Square demonstrates a highly competent and elegant approach that showcases innovation in the workplace environment.” The regeneration of the historically important cultural quarter is a key ambition, and this development will act as a catalyst for further high-quality developments, such as the Vulcan Works. The scheme was designed to accommodate up to 2,000 people (Source, BDP website). For comparison, applying Homes England job density guidelines gives 1,487 jobs.
5.2. The University of Northampton Innovation Centre at Site 13 The University of Northampton Innovation Centre offers new modern office space on within close proximity to both Northampton Town Centre and Northampton Railway Station. The Innovation Centre boasts 42 flexible office units, with varying sizes to meet all requirements, and the opportunity for new businesses to grow in a supportive environment. The Innovation Centre has been a successful development within the enterprise zone, as it has provided the opportunity for smaller independent firms to operate from affordable high quality town centre office accommodation. In this regard it provides a fundamental role in developing the Northampton town centre office market, that will increase demand for town centre accommodation as businesses mature and require larger premises. Applying Homes England job density guidelines, the scheme will generate 51 office jobs.
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5.3. Northampton Railway Station at Site 12 Northampton Railway Station was redeveloped in 2015 to include a brand new station building to replace the existing station building. The redevelopment has provided a brand new and modern fit for purpose station building with increased capacity, and well as drastically improved station facilities and commercial units. The new development has a rateable value of £110,250 per annum, an increase on the old station that had a rateable value of £42,250 per annum, an increase of £68,000 per annum. Over the lifetime of the EZ, this scheme will produce gross rates additionality of £1.13 million which will be retained by the LEP to be invested in the LEP area. Plans for a new multi storey car parking are advancing to improve station accessibility, increasing station parking from circa 866 to 1330 spaces. This development improves a key public transport link to Northampton town centre and strengthens the gateway into the town. The new station provides rail services to Birmingham, London Euston and Crewe as well as a number of more local services. Applying Homes England density guidelines, the scheme will provide 21 retail jobs within the commercial units.
5.4. Ellerman Tyton at Site 7C In 2017, the construction of a new 3948m² industrial unit was completed, ready for occupation by Hellermann Tyton. The new unit is located off Edgar Mobbs Way, in an established industrial location. There have been a number of planning applications submitted for the site, with planning permission granted most recently for a 1434m² waste transfer station with an ancillary office/welfare building of 284m². In addition to this, the Hellermann Tyton Building will generate a total surplus business rates additionality of £1.79 million over the life of the Enterprise Zone and 110 jobs (applying Homes England density guidelines).
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5.5. St John’s Student Accommodation at Site 19 In 2012, construction began on the former St Johns Street surface level car park to deliver student accommodation for the University of Northampton. The St Johns Student accommodation provides a mixture of one and two bedroom accommodation. The site is located just 5-minutes’ walk from the Waterside University Campus and is located in the heart of the town centre.
5.6. Premier Inn Hotel at Site 18 The new 104 bedroom Premier Inn at Albion Place in central Northampton was completed in 2015. Developed on Council owned land, the scheme has played an important role in the on- going regeneration of the cultural quarter. The hotel has created 35 jobs (Homes England employment density guidance).
5.7. Summary of all completed development The table below provides a summary of all large development schemes that have taken place to date within the enterprise zone.
Site Ref Name Use Area m² Gross rates Job creation additionality
7c Waterside House Industrial 3,948 £1.79 Million 110
11 Cosworth Factory Industrial 11,747 £4.06 Million 326
12 Northampton Railway Station Retail 236 £1.45 Million 21
13 Innovation Centre Offices 608 £0.83 Million 51
16 Lidl Retail 2,758 £6.67 Million 31
17 One Angel Square Offices 17,845 £19.81 Million 1,487
17 Phipps Northampton Brewery Brewery 1,500 £0.54 Million 42
18 Premier Inn Hotel 104 Rooms £2.85 Million 35
20C Carlsberg Expansion Industrial - £4.76 Million -
21A/B/C University Waterside Campus Mixed-Use - £8.39 Million -
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6. Enterprise Zone Business Rates Modelling 6.1. C&W Infrastructure Funding Model Cushman & Wakefield has developed an infrastructure funding model which brings together the overall financial impacts of the EZ including business rates additionality arising from new development set against investment in intervention. The purpose of this model is to provide financial projections for the Enterprise Zone and to enable a range of income and investment scenarios to be modelled in order to assist with business planning. This can be done on a site-by-site basis or aggregated for the EZ as a whole. For the purpose of this instruction, we have utilised the business rates forecasting functionality of the model. C&W has undertaken research and due diligence to arrive at assumptions around development take up, quantum and an assumed rateable value to calculate the estimated revenue in the form of new business rates income that might accrue from new development in the EZ. The model concentrates on the following two areas:
i. New Development: projecting the scale and timing of new development at each of the EZ sites and forecasting the amount of new business rates revenue that should accrue from these. These are estimates only and there can be no guarantee of future development or future business rates growth income. ii. Baseline Position: identifying the existing rating assessments at each of the EZ sites and forecasting when these will be lost to provide for new development. Taken together these are used to calculate the net increase in business rates revenues. Projections are made for the full 25 years of the EZ from April 2012. In order for the new development to be achieved within the EZ, investment is required by the LEP to ‘unlock’ the identified barriers to delivery. To understand the ability of the business rates additionality to fund proposed investment interventions, the model includes an ‘Investment Plan’ that identifies the capital projects and calculates the cost of financing these using Prudential Borrowing. In each case it is assumed that the project costs are fully paid off over the term of the EZ’s life.
6.2. Modelling Scenarios The model enables different assumptions and scenarios to be analysed to show the impact on business rate income of varied levels of take up/ development. Based on our engagement with stakeholders and C&W’s market knowledge of the sites, we have produced the following EZ model scenarios:
SCENARIO 1 – COMPLETED DEVELOPMENT PROFILE This represents and models development that has already taken place on site, since the start of the Enterprise Zone. In this regard it can be considered the ‘worst case’ scenario as it relates to certain business rates income that is already being generated and doesn’t take into account any future development.
SCENARIO 2 – REALISTIC FUTURE DEVELOPMENT PROFILE This represents and models C&W’s view of take up for each site, based on the market review of the sites, and knowledge of progress made on each site to date. In our view, this represents the most likely scenario to be realised.
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SCENARIO 3 – OPTIMISTIC DEVELOPMENT PROFILE This represents and models all future development that could take place on the sites throughout the Enterprise Zone. Projects included in this scenario are unlikely to come forward in the immediate future due to limited design and planning or due to a lack of market demand. This scenario will provide the best-case scenario for the enterprise zone, assuming that all potential development Is brought forwards.
6.3. Modelling Assumptions
6.3.1. KEY GENERAL ASSUMPTIONS The key assumptions applied to the model are as follows: • Inflation has been applied at 2.5% in-line with the Bank of England’s target rate of inflation • Evaluation period of 25 years • Start date of 1 April 2012 • Multi-site model to calculate income and expenditure profiles • Each site phased, based on an assumed take up profile linked to market analysis • Discounted cash flow analysis to calculate net present costs, using a nominal discount rate of 5.83% (real discount rate of 3.5% in accordance with HM Treasury Green Book) • Contingency of 10% applied to all business rate growth forecasts, further allowances bad debt and reliefs totalling 5%. The model also includes assumptions around existing development on site. For instance, in some zones there is existing development that is already generating business rates income. There are also some instances of hereditaments that are included in the business rates baseline and will be demolished to make way for new development. The business rates that will be lost from these demolitions should be netted off from the new business rates to arrive at a sum for net business rates additionality.
6.3.2. SCENARIO 1 ‘COMPLETED DEVELOPMENT’ ASSUMPTIONS Since its inception, the EZ has seen a significant amount of development that is already generating and accumulating positive business rates that will be retained by the LEP. This provides ‘certain’ income and so provides a low risk funding source for LEP priorities.
Development profile Development under this scenario includes a mix of high-profile schemes, such as One Angel Square, the Cosworth factory, the Innovation Centre and Northampton Railway Station, as well as a number of smaller schemes. The development under this scenario is summarised in the table below:
Area Scheme Use (sqm) Area (sqft) RV Tone (£/sqm) Date of Creation Site 1 – Cobbler’s Car Wash Carwash - - 10,000 2019 Site 3 – Ross Road redevelopment Industrial 4,972 53,518 22-30 2013-2015 Site 7 – Waterside House Industrial 3,948 42,495 44 2017 Site 8 – Harvey Reeves Road Mixed Offices and 1,178 12,679 60-86 2014-2017 Dev. Industrial Site 9- St James Mill Road Industrial 28 301 41 2017
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Area Scheme Use (sqm) Area (sqft) RV Tone (£/sqm) Date of Creation Site 10- St James Mill Road East Industrial 2902 31,236 34 2015 Site 11 – Cosworth factory Industrial 11,746 126,433 28 2015 Site 12- Northampton Railway Retail 369 3,972 275-750 2015 Station Site 13 – Innovation Centre Offices 608 6,545 95-126 2015-2019 Site 14 – Freeschool St Mixed Dev. Industrial 655 7,050 10-59 2015-2018 Site 15 – St Peters Carpark Car Park 259 2,787 348 2015 Site 16 - Lidl Retail 2,758 29,687 180 2017 Site 17 – Brewery Brewery 1,500 16,145 12-90 2014-2019 Site 17 - Offices Offices 17,845 192,082 90 2017 Site 18 – Premier Inn Hotel - - 212,500 2015 Site 20 – Miscellaneous Dev. Industrial 759 8,170 95 2015 Site 20 - Carlsberg Industrial - - 330,000 2013 Site 21- Waterside University Mixed-use - - 2,760,000(£522,000) 2018 Campus*
Rateable Value All developments are complete, and the Rateable Values have been obtained from the Rating List. A number of hereditaments have been demolished to make way for new development, and this will impact the net business rates additionality. Please note that the above scenario includes a total of 43,398 m² of deleted hereditaments, which equates to a total rateable value of £1.9 million per annum and a notional rates liability of £868,000 per annum that will be netted off the new business rates to calculate the net business rates additionality. [It is worth highlighting that number of these sites will not see commercial development and therefore will not generate business rates. As currently modelled, this has a negative impact on the overall zone. In some instances, with other EZs MHCLG has taken a practical approach and agreed that the calculations should disregard some of these. The Council should discuss with MHCLG whether it is possible to remove these sites from the EZ. * Please note – The Rateable Value of development at Site 21, Waterside University Campus, is £2.76 million, however, this is subject to 80% charitable rates relief and as such the Rateable Value is adjusted to £522,000.
Take up and completion assumptions Again, as all development has been completed, we have taken the delivery timescales from the Rating List to accurately reflect when business rates became payable.
6.3.3. SCENARIO 2 ‘REALISTIC FUTURE DEVELOPMENT’ ASSUMPTIONS
Development profile Having regard to the market review and knowledge of the EZ sites, we set out below our view of what further development is most likely to occur in the zone and our opinion of timescales for delivery. The development profile is summarised below:
Area RV Tone Scheme Use (sqm) Area (sqft) (£/sqm) Date of Creation Site 1 - Duston Mill Industrial 9,754 104,991 86 2024-2026 Site 2 - Upton Way Industrial 9,913 106,703 78 2025-2027
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Area RV Tone Scheme Use (sqm) Area (sqft) (£/sqm) Date of Creation Site 3 - Sixfields Industrial 17,837 191,995 75 2028-2032 Site 6 - Wreford’s Extension Industrial 1,500 16,145 70 2022 Site 7 - Edgar Mobbs Way Industrial 19,952 214,762 78 2022-2028 Site 12 - Railway Station Carpark Car Parking 1330 - 175 2021 Development (Spaces) Site 13 - Four Waterside Offices 4,738 50,999 215 2023 Site 13 - Four Waterside Hotel 128 20,000 2,043 2024 (Rooms) Site 17 - Vulcan Works Offices 3,461 37,253 150 2022
Rateable Value Having completed a market review, we have applied our market knowledge of the sites to arrive at an estimate of the Rateable Value. We have adopted the following assumptions: • Sites 1, 2, 3, 6 and 7 Industrial development – We have adopted an RV of between £70 m² - £86 m² depending on the site’s location and prominence. We discounted the Wreford’s RV to reflect that the site does not have its own access. • Site 12 Railway station car park – Car parks are valued on the profits method of valuation, as opposed to a standard ‘market rate’. The existing station car park is not on the Rating List (it is listed centrally) and so there is no current RV to have reference to. We analysed the RVs of Northampton town centre car parks and as a high-level assumption have applied an RV per parking space of £175 to match the Chalk Street car park, which is the closest car park to the station and well utilised for station car parking. This is a prudent assumption, and it is possible that the completed car park could achieve a higher RV. • Site 13 Four Waterside Offices – £215 m². The OBC for this scheme proposes that the Council takes a wrapper lease, in which case they will take on the Business Rates liability. Therefore, whilst this income is generated and retained by the LEP, this is a significant cost that the Council will be liable for. • Site 13 Four Waterside Hotel – Hotels are valued on the profits method of valuation, as opposed to a standard ‘market rate’. As a high-level assumption, we have taken the total RV of the Premier Inn hotel, and calculated the RV per hotel bed, this rate of £2,043 per hotel bed has been applied. It is likely that the hotel operator will take on the rates liability. • Site 17 Vulcan Works – We have been advised by the Council that these units will be available at a rate of £150 m² and we have applied this as the RV rate. It is likely that the scheme operator will take on rates liability.
Take up and completion assumptions Having regard to our market review and understanding of development proposals, we have adopted the following assumptions around take up: • Sites 1, 2, 3, 6 and 7 Industrial development – We have assumed that Site 7 and Site 3 will be prioritised and will be brought forward first. This is to avoid competition with Sites 1 and 2. Site 7 could be occupied and generating business rates by 2022, and Site 3 the 2023. Sites 1 & 2 are slightly more complicated with flood zone issues to address so are brought forward in 2024 and 2025 respectively. One limitation is that we do not know what landowner aspirations are for these sites, and this could have an impact on delivery timescales. The current assumptions assume willing landowners. If this is not the case we may need to revise timescales for instance to build in time for the Council to acquire the sites. • Site 12 Railway station car park – We have been advised that the car park will be delivered in 2021.
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• Site 13 Four Waterside– The Outline Business Case states that the office scheme at Four Waterside will be delivered by August 2022, with the empty business rates relief therefore expiring in circa December 2022. We have therefore adopted 2023 as the first year that a full year of rates will be payable (to avoid over-estimating), and we have assumed that the hotel will complete the following year in 2024. • Site 17 Vulcan Works – We are advised that the scheme will complete in 2021. it is being run by an operator, rates will be payable that same year. We have adopted 2022 as the first year that a full year of rates will be payable so as to avoid over-estimation in the model.
6.3.4. SCENARIO 3 ‘OPTIMISTIC DEVELOPMENT’ ASSUMPTIONS
Development profile The following schemes are dependent on external factors and are therefore included in the more optimistic development scenario: Area RV Tone Scheme Use (sqm) Area (sqft) (£/sqm) Date of Creation Horizon Park (Site 16) Offices 2,323 25,004 150 2030
Swan Street Offices (Site 18) Offices 1,664 17,911 150 2026
Rateable Value For consistency we have applied the same RV tone as Vulcan Works (£150/sqm).
Take up and completion assumptions Development proposals for both of these schemes are in very early stages. We have taken the view that development of these schemes will only occur once the wider office schemes being promoted and/ or funded led by the Council have had the time to mature and grow demand for office development in these locations. We have assumed that Swan Street could be delivered in 2026, and given the complexity associated with the heritage issues at Horizon Park we have assumed that this will be delivered in 2030.
6.4. Infrastructure Funding The client team has provided the following investment plan:
Site ref Cost item Cost From To
13 Four Waterside market rent £6,245,187 2022/23 2037/38 subsidy - BRU
13 St Peters Roundabout/Black Lion £3,489,983 2021/22 2022/23 Hill - GPF
12 Castle Station - NCC £5,000,000 2023/2024 2023/2024
11 Cosworth - Balance repayment - £1,210,328 2023/2024 2023/2024 GPF
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8 St James Mill Road Sub Station - £1,449,942 2024/25 2025/26 LIF
8 St James Mill Link Road - GPF £565,880 2026/27 2026/27
Total £17,961,320
The above sets out a total funding requirement of £17.96 million to deliver all development options across the lifetime of the EZ. For all scenarios, the assumption has been made that development will not occur if the infrastructure funding package is not delivered. It is assumed that the Council is financing these interventions, and that these costs will be recovered from the rates growth income throughout the EZ period. This can create cashflow requirements where the business rates do not cover the financing costs, and we highlight the ‘peak deficit’ of each scenario in the modelling below so that the Council has an understanding of their maximum borrowing.
6.5. Financial Analysis
6.5.1. SCENARIO ONE – COMPLETED DEVELOPMENT PROFILE
WHOLE ENTERPRISE ZONE This scenario summarises the completed development and therefore represents the known business rates income. The existing properties are already generating business rates. Therefore, the values that have been input into the model are up to date rateable values obtained from the Valuation Office, as opposed C&W market assumptions. This is summarised in the table below: The table below summarises the assumptions behind the business rates forecast:
Scenario One EZ Overall
Projected Rates Income* £32.25 Million
Contingency (on income) @ 10% -£3.23 Million
Capital Exp. Financing Costs -£9.35 Million
Revenue Exp. 0
Break even year (model in surplus) 2017 (year 6)
Peak deficit amount -£0.28 Million
Peak deficit year 2016 (year 5)
Surplus/Deficit (incl. Contingency) £18.07 Million
* Includes provision for bad debt and reliefs Please note that the above scenario includes a total of 43,398 m² of deleted hereditaments, which equates to a total rateable value of £1.90 million per annum and a notional rates liability of £868 per annum that will be netted off the new business rates to calculate the net business rates additionality. The diagram below shows the cumulative position of rates income change:
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This highlights the positive position created by hereditaments being developed in Years 1 to 5 and illustrates that the model goes into a surplus business rates position in Year 6 (2017) and beyond. The model shows that a surplus is produced for the remainder of the life of the EZ. The following graph shows the calculation of the total gain in business rates that is projected over the life of the EZ.
This illustrates the total surplus of business rates additionality that is available over the life of the EZ. The figures in this graph make an allowance for a contingency and provision for bad debt and relief. The model goes into positive in Year 6 (2017). Overall the model generates a total business rates additionality of £18.07 Million.
SITE SPECIFIC The following table summarises financial modelling outputs for each individual site to illustrate the site-specific impact on the wider EZ:
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Site Project Projected rates Contingency Capital Break Peak Surplus/ Description income (on income) @ expenditure even year deficit deficit 10% Financing Costs
1 Duston Mill £0.12 Million -£0.011 Million £0 N/A N/A £0.097 Lane Million
3D Ross Road -£0.24 Million -£0.02 Million £0 N/A -£0.21 -£0.21 Million Million
5B Lincoln Street -£1.72 Million -£0.17 Million £0 N/A -£1.47 -£1.47 Million Million
7C Edgar Mobbs £1.79 Million -£0.18 Million £0 2017 N/A £1.53 Way South Million
8 Harvey Reeves -£0.61 Million -£0.061 Million £2.02 Million N/A -£3.37 -£3.37 Road Million Million
9A St James Mill -£5.81 Million -£0.58 Million £0 N/A -£4.94 -£4.94 Road Million Million
10 St James Mill -£2.25 Million -£0.23 Million £0 N/A -£1.91 -£1.91 Road East Million Million
11 St James Mill £4.06 Million -£0.41 Million £1.69 Million 2015 N/A £1.76 Road Riverside Million (Cosworth Factory)
12 Northampton £0.91 Million -£0.09 Million £0 2015 -£0.01 £0.76 Railway Station Million Million
13 St Peter’s Way -£0.78 Million -£0.08 Million £4.81 Million N/A -£0.67 -£0.67 (Innovation Million Million Centre)
14 Freeschool -£0.37 Million -£0.04 Million £0 N/A -£0.32 -£0.32 Street Million Million
15 St Peter’s Car £0.15 Million -£0.02 Million £0 2015 N/A £0.12 Park Million
16 National Grid £4.48 Million -£0.45 Million £0 2018 -£0.20 £3.81 Site Million Million
17 Project Angel £17.9 Million -£1.8 Million £0 2017 -£0.09 £15.27 (One Angel Million Million Square)
17 Project Angel £0.15 Million £0.02 Million 0 2015 £0.004 £0.13 (The Brewery) Million Million
18 Albion Place £2.70 Million -£0.27 Million £0 2015 -£0.004 £2.29 (Premier Inn) Million Million
19 St John’s -£1.51 Million -£0.02 Million £0 N/A -£1.29 -£1.29 Million Million
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Site Project Projected rates Contingency Capital Break Peak Surplus/ Description income (on income) @ expenditure even year deficit deficit 10% Financing Costs
20A Bridge Street £0.11 Million £0.01 Million £0 2015 N/A £0.09 Million
20C Carlsberg £4.76 Million £0.48 Million £0 2013 N/A £4.04 Million
21 Avon/ Nunn £8.39 Million -0.84 Million £0 2018 N/A £7.13 Mills Million
6.5.2. SCENARIO TWO – REALISTIC DEVELOPMENT PROFILE
WHOLE ENTERPRISE ZONE This scenario summarises the completed development and therefore represents the known business rates income. The existing properties are already generating business rates. Therefore, the values that have been input into the model are up to date rateable values obtained from the Valuation Office, as opposed C&W market assumptions. This is summarised in the table below: The table below summarises the assumptions behind the business rates forecast:
Scenario Two EZ Overall
Projected Rates Income* £85.34 Million
Contingency (on income) @ 10% --£8.53 Million
Capital Exp. Financing Costs -£24.93Million
Revenue Exp. 0
Break even year (model in surplus) 2017 (year 6)
Peak deficit amount -£0.28 Million
Peak deficit year 2016 (year 5)
Surplus/Deficit (incl. Contingency) £47.61Million
* Includes provision for bad debt and reliefs The diagram below shows the cumulative position of rates income change and therefore shows the total business rates generated in each year.
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This highlights the positive position created by hereditaments being developed in 1 to 5 and illustrates that the model goes into a surplus business rates position in Year 6 (2017) and beyond. The model shows that a surplus is produced for the remainder of the life of the EZ. The following graph shows the calculation of the total gain in business rates that is projected over the life of the EZ.
This illustrates the total surplus of business rates additionality that is available over the life of the EZ. It shows the neutral position in the early years before development has commenced. The figures in this graph make an allowance for a provision for bad debt and relief. The model goes into positive in Year 6 (2017). Overall the model generates a total business rates additionality of £47.61 Million.
SITE SPECIFIC The following table summarises financial modelling outputs for the additional development in Scenario 2, of each individual site to illustrate the site-specific impact on the wider EZ:
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Site Project Projected Contingency Capital Break Peak Surplus/ Description rates (on income) expenditure even deficit deficit income @ 10% Financing year Costs
1 Duston Mill £6.87 -£0.69 Million £0 N/A N/A £5.84 Million Million
2 Upton Way £5.87 -£0.59 Million £0 N/A N/A £4.99 Million Million
3 Sixfields £7.01Million -£1.13 Million £0 N/A N/A £5.95 Million
6 Wreford’s £1.04 -£0.01 Million £0 N/A N/A £0.88 Extensions Million Million
7 Edgar £12.70 -£1.27 Million £0 N/A N/A £10.80 Mobbs Way Million Million
12 Railway £2.43 -£0.24 Million -£6.97 Million N/A -£4.91 -£4.91 Station Car Million Million Million park
13 Four £11.80 -£1.18 Million -£8.62 Million 2023 -£0.06 £1.42 Waterside Million Million Million
17 Vulcan £5.13 -£0.51 Million £0 N/A N/A £4.36 Works Million Million
6.5.3. SCENARIO THREE – OPTIMISTIC DEVELOPMENT
WHOLE ENTERPRISE ZONE The Council is in the early stages of preparing development proposals for Site 16 and Site 18. Both commercial development that is considered risky in the current market, and so completion of these schemes occurs later in the lifetime of the EZ (if at all). Horizon Park depends on significant public sector funding to secure the redevelopment of an important heritage asset, and so this scheme is highly risky and could take longer than the proposed ten year period to deliver. Similarly, the scheme at Swan Street relies on wide initiatives to develop the town centre office market and equally is considered a risky scheme both in market demand and financial viability terms. The table below summarises the assumptions behind the modelling:
Scenario Three EZ Overall
Projected Rates Income* £89.01 Million
Contingency (on income) @ 10% -£8.90Million
Capital Exp. Financing Costs -£24.93 Million
Revenue Exp. 0
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Break even year (model in surplus) 2017 (year 6)
Peak deficit amount -£0.69 Million
Peak deficit year 2016 (year 5)
Surplus/Deficit (incl. Contingency) £50.72 Million
* Includes provision for bad debt and reliefs The diagram below shows the cumulative position of rates income change and therefore shows the total business rates generated in each year.
This highlights the positive position created by hereditaments being developed in Years 1 to 5 and illustrates that the model goes into a surplus business rates position in Year 6 (2017) and beyond. The model shows that a surplus is produced for the remainder of the life of the EZ. The following graph shows the calculation of the total gain in business rates that is projected over the life of the EZ.
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This illustrates the total surplus of business rates additionality that is available over the life of the EZ. It shows the relatively neutral position in the early years as development begins to commence. The figures in this graph make an allowance for a provision for bad debt and relief. The model goes into positive in Year 6 (2017). Overall the model generates a total business rates additionality of £50.72 Million.
SITE SPECIFIC The following table summarises financial modelling outputs for each individual site to illustrate the site-specific impact on the wider EZ:
Site Project Projected Contingency Capital Break Peak Surplus/ Description rates (on income) expenditure even deficit deficit income @ 10% Financing year Costs
16 Horizon £1.77 -£0.18 Million £0 N/A N/A £1.50 Park Million Million
18 Swan Street £1.90 -£0.19 Million £0 N/A N/A £1.61 Offices Million Million
6.6. Modelling summary For ease of reference, the tables below summarise the outputs of the modelling for each scenario:
EZ Overall Scenario 1 Scenario 2 Scenario 3
Projected Rates Income* £32.25 Million £85.34 Million £89.01 Million
Contingency (on income) @ 10% -£3.23 Million --£8.53 Million -£8.90 Million
Capital Exp. Financing Costs -£9.35 Million -£24.93 Million -£24.93 Million
Revenue Exp. 0 0 0
Break even year (model in surplus) 2017 (year 6) 2017 (year 6) 2017 (year 6)
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Peak deficit amount -£0.28 Million -£0.28 Million -£0.69 Million
Peak deficit year 2016 (year 5) 2016 (year 5) 2016 (year 5)
Surplus/Deficit (incl. Contingency) £18.05 Million £47.61 Million £50.72 Million
6.7. Financial modelling findings
WHOLE ENTERPRISE ZONE The tables above illustrate the success of the EZ to date. Scenario 1, which represents all the completed development, generates a total surplus of £18.05 Million. This is certain income available to the LEP, after netting off the lost business rates due to demolitions. When the Scenario 2 sites are included, the overall surplus generated across the whole zone increases to £47.61Million over the lifetime of the EZ, an extra £29.56 Million. Some of these developments are either nearing completion or have a high level of delivery confidence, such as The Vulcan Works and the railway station car park, which increases security of this income. The Scenario 3 sites are considered riskier in market and delivery terms. When these sites are modelled the overall surplus of the EZ increases to £50.72 Million, an increase of £3.11 Million. This relatively small increase is because the schemes themselves are smaller, but also they are delivered later in the EZ (2026 and 2030) and so there is less time for the business rates additionality to accumulate. This raises an important point about a key benefit of the EZ machinery and the ability to accumulate business rates over the lifetime of the EZ. The Scenario 2 sites provide strong development opportunities with good delivery prospects. The Council should therefore, focus on accelerating their delivery as this will maximise the business rates that can be generated from the schemes. However, it is important to note that some of these schemes will require further intervention to enable delivery, and we discuss in Section 6 & 7 what further work is required to better understand the affordability of these sites. Given the importance of the industrial development sites to the scenario 2 surplus, further work is required to understand costs associated with bringing these sites forward as well as what impact this could have on delivery timescales. This is discussed further in Section 6 & 7.
SITE SPECIFIC – SCENARIO 1 SITES Of the Scenario 1 sites, only Site 11, St James Mill Road Riverside (Cosworth factory) has any capital costs attributed to it, which relate to a balance repayment for GPF funding of £1.20 Million. This site generates a surplus of £1.76 Million after these costs have been repaid through the business rates generated by the new scheme. The remaining sites can be split between those that generate a surplus, and those that produce a negative deficit position. The surplus sites do not have any capital costs to be paid back through the business rates additionality, and any demolitions do not have an overall negative impact on the new business rates, these sites are: • Site 1 Duston Mill Lane • Site 7C Edgar Mobbs Way South • Site 12 Northampton Railway Station • Site 15 St Peter’s Car Park
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• Site 16 National Grid Site • Site 17 Project Angel (One Angel Square) • Site 17 Project Angel (The Brewery) • Site 18 Albion Place (Premier Inn) • Site 20A Bridge Street • Site 20C Carlsberg • Site 21 Avon/ Nunn Mills The site that has the most significant impact upon the zone is the redevelopment of One Angel Square at Site 17, Project Angel. This produces an overall surplus of £15.27 Million which produces a secure income to the zone. The next most significant scheme is the development at the university campus (Site 21) which produces a surplus of £7.13 Million. Both schemes do not have capital costs attributed to them in the context of this modelling exercise. Whilst the deficit sites do not have any capital costs attributed to them, the business rates lost due to site demolitions has an overall negative position on the site producing a negative deficit position. These include: • Site 3D Ross Road • Site 5B Lincoln Street • Site 8 Harvey Reeves Road • Site 9A St James Mill Road • Site 10 St James Mill Road East • Site 13 St Peter’s Way (Innovation Centre) • Site 14 Freeschool Street • Site 19 St John’s Site 14, Freeschool Street and Site 19, St John’s, are being brought forward for residential development. These sites will therefore not generate business rates, and yet as currently modelled will have a negative impact on the performance of the overall zone. We are aware that in some instances, MHCLG has taken a practical approach to this and agreed with individual zones to disregard these lost business rates. It is recommended that if the Council has not already had these discussions, they approach MHCLG to query this.
SITE SPECIFIC – SCENARIO 2 SITES The only Scenario 2 sites that have a capital cost attributed to them are Site 12, the Railway Station car park, and Site 13, Four Waterside. Site 12 includes £6.97 Million in financing costs, but only produces rates income of £2.3 Million, and so this site produces an overall deficit of -£4.91 Million. Whilst this calculation does not include the income generated by the car park, overall, the business rates generated by the new car park in isolation does not meet the capital expenditure. It is worth noting that given the difficulty in estimating the Rateable Value of a car park, a prudent RV Tone has been adopted so there could be an upside to this. The Four Waterside scheme at Site 13 produces a surplus of £1.42 Million, which is an encouraging result in the context of the strategic importance of this site. It is worth highlighting that this scheme ‘breaks even’ in 2023, which de-risks the funding profile of this capital contribution.
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Site 17, Vulcan Works, produces a surplus business rates position of £4.36 Million, but as there have been no demolitions to enable its delivery, and no capital costs attributed, this is simply a function of the scheme completing and generating ‘new’ business rates income. Industrial development is proposed at Sites 1, 2, 3 and 7. These sites all generate a surplus given that there are no demolitions, and no capital costs attributed to them. Site 7 and Site 3 generate the largest surpluses in the Scenario 2 sites at £10.80 Million and £5.95 Million respectively. This demonstrates a strong argument for prioritising delivery of these sites. Site 1 and 2 produce a significant surplus of £5.84 Million and £4.99 Million. However, these sites do not have any capital costs attributed to them, and there could be a strong case for LEP funding to accelerate delivery of these sites and maximise the business rates potential that can be generated within the lifetime of the EZ. It is worth noting that with the exception of Site 3 we are not aware of who owns the sites and their appetite for development, and this could have an impact upon our assumed delivery timescales. Site 3a is owned freehold by the Council, and that the football club own the long leasehold and that the wider site (incorporating the former Athletics Ground, Site 3b and 3c) has abnormal, enabling & remediation issues estimated at £13 million. To reflect this we have pushed the delivery timescales out to 2028.
SITE SPECIFIC – SCENARIO 3 SITES Both Scenario 3 schemes do not have any capital costs attributed to them, or business rates lost due to demolitions. Site 16, Horizon Park generates a surplus of £1.5 Million. Given the heritage aspects to this scheme, this is unlikely to be sufficient to forward fund delivery of this scheme which highlights that the Council will need to identify alternative funding sources to deliver this. Site 18, Swan Street office scheme generates a surplus of £1.61 Million. For both schemes, development proposals are in the early stages and further work will be undertaken to better understand scheme viability and deliverability as these proposals are developed.
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7. Site prioritisation
This report has identified a number of sites as having future development potential (the Scenario 2 & 3 sites). This section considers how the Council could prioritise delivery of these sites and the recommended interventions, taking into account the following factors: • Land assembly issues – Whether the site has a willing and proactive landowner whose development aspirations are aligned with the assumptions set out in this report; • Delivery of Council objectives and including employment creation and impact on the town centre; • Surplus/ Deficit – whether the site produces a surplus or a deficit position. The sites have been prioritised as follows: • Short term sites – these are the sites that will have a significant local impact and can be delivered in the short term. The Council should prioritise delivery of these sites. • Medium term sites – these sites have a positive local impact, and ca be delivered over the medium. These sites make an important contribution to achievement of Council objectives for the EZ but will follow the short term sites in terms of priority. • Longer term sites = These sites offer a longer term potential to generate positive outcomes for the EZ but will take greater intervention to be delivered.
Options Development Land Assembly Council objectives Surplus/ Intervention Type Deficit
Short term: Significant local impact and relative ease of delivery
Site 13 – Mixed use – Council own and Important objective to Surplus Update due diligence into Four Offices, Hotel control the site grow town centre office site market demand in light of on- Waterside & Residential market. going economic uncertainty.
Deliver employment in Review funding arrangements. line with Council and Government EZ agenda.
Site 7 – Industrial The site is in third Deliver employment in Surplus Priority - Engage with landowner Edgar Mobbs party ownership. line with Council and site – requirement for Council to Way Landowner Government EZ agenda. acquire?
aspirations for the Site surveys and investigations site are unknown. Market testing
Review delivery mechanisms – joint delivery/ site sale, etc.
Site 12 – Car park Public sector own Additional parking Deficit site n/a – no additional interventions Railway and operate the capacity will improve required Station car site. accessibility of public park transport
Site 17 – Offices Council own and Important objective to Surplus n/a – no additional interventions Vulcan control the site grow town centre office site required Works market
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Options Development Land Assembly Council objectives Surplus/ Intervention Type Deficit
Site 6 - Industrial Site owned and Supports local business Surplus Engagement with business Wrefords operated by and creates new site owner to understand timescales Extension Wrefords who employment for site delivery and whether the propose new Council is able to offer any building additional support.
Medium term: Positive impact but medium-term delivery
Industrial The site is in third Deliver employment in Surplus Priority - Engage with landowner party ownership. line with Council and site – requirement for Council to Site 1 – Landowner Government EZ agenda acquire? Duston Mill aspirations for the Site surveys and investigations site are unknown. Market testing
Review delivery mechanisms – joint delivery/ site sale, etc.
Site 2 – Industrial The site is in third Deliver employment in Surplus Priority - Engage with landowner Upton Way party ownership. line with Council and site – requirement for Council to Landowner Government EZ agenda acquire? aspirations for the Site surveys and investigations site are unknown. Market testing
Review delivery mechanisms – joint delivery/ site sale, etc.
Site 3 – Industrial Council own and Deliver employment in Surplus Site surveys and investigations Sixfields control the line with Council and site Market testing Freehold of the Government EZ agenda.
site, but Football Significant remediation works Club have a long required term leasehold over the land Review delivery mechanisms – joint delivery/ site sale, etc.
Longer term: Longer term potential or greater intervention required.
Site 16 – Offices Council own and Important objective to Surplus Site investigations Horizon Park control the site grow town centre office site – Market testing market. although heritage Viability work Deliver employment in aspect will line with Council and make this Government EZ agenda. an Restoration of heritage expensive asset. developm ent.
Site 18 – Offices Council own and Important objective to Surplus Site investigations Swan Street control the site grow town centre office site. Market testing market. Viability work Deliver employment in line with Council and Government EZ agenda.
The top priority sites are as follows:
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• Site 13 – Four Waterside: The development of this site is considered a top priority for the Council to meet its ambitions to strengthen the town centre office market. This site requires EZ funding of £6,245,187 to fund the market rent subsidy, and overall will generate a surplus of £1.42 Million over the lifetime of the EZ. This is fairly marginal in the context of the costs associated with delivery. We are aware that the Council is separately progressing an Outline Business Case for the site and intends to commission a delivery and procurement strategy to identify the most appropriate means of bringing the site to the market. • Site 7 – Edgar Mobbs Way: Current assumptions do not include any EZ funding and the site generates a positive surplus of £10.8 Million. If this land was developed we are confident it would be highly attractive to occupiers and investors. As a priority, the Council should engage with the landowner to understand their appetite for the site, and to understand whether any additional information is available as to any site abnormals that could impact the development assumptions made in this report, or whether further site investigation works are required/ proposed. Dependant on the outcome of these discussions, and the nature of any development constraints, the Council could investigate whether the business rates mechanism could be used as a fund source to accelerate development. Using the financial model developed for this study the Council will be able to consider the financial impact of different delivery timescales on the overall outputs of the wider zone. • Site 12 – Railway station car park: This workstream is being progressed and we have been advised that the car park will be delivered in 2021. This site requires EZ funding of £5,000,000, and overall will generate a deficit of -£4.91 Million over the lifetime of the EZ. The model currently assumes that the business rates income generated by the car park will be retained by the LEP, as opposed to being considered a central asset as it is currently. If this proves to be incorrect then the modelling assumptions would need to be revisited. It is worth noting that due to the current car park being on the central rating list, we do not know what the current rateable value it and have adopted prudent income assumptions. • Site 17 – Vulcan Works: This development is also being progressed and we understand the scheme will be delivered in 2021. This site does not rely on any EZ funding and generates a positive surplus of £4.36 Million to the zone. • Site 6 – Wrefords Extension: We understand that the occupier is progressing this application. We recommend that the Council remains in contact with the occupier so that the may offer support as required. This site also does not rely on EZ funding and generates a positive surplus of £0.88 Million for the EZ. Overall, these priority sites require up-front investment of £11,245,187, comprising £6,245,187 to fund the market rent subsidy at Four Waterside and £5,000,000 to fund the capital cost of the Railway Station car park.
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8. Conclusion and recommendations 8.1. Report summary Cushman & Wakefield has undertaken a detailed review of the Northampton Waterfront Enterprise Zone, with a focus on reporting on development progress to date and establishing the future development potential of the zone and what interventions the Council can make to maximise this. We undertook a site review, including a detailed review of the Rating List to understand the nature of new development since the inception of the EZ. We also reviewed which buildings have been demolished, to understand what business rates income has been lost and needs to be netted off any ‘new’ business rates income generated by new development. A detailed site summary is included at Appendix B. The site has seen a significant number of successful development schemes (Scenario 1 sites) that are already generating business rates income every year, producing a total surplus for the zone that the LEP can reinvest. This is a huge success story as this income is certain and accumulates for each year of the EZ. We undertook a high-level review of this completed development to highlight the benefits of each scheme, including job creation. We also undertook a market review to determine the development potential of the remaining EZ sites. This identified that a number of the EZ sites are either fully developed out, or that there is no available land that is suitable for development. This market review also identified a number of sites with strong development potential (the Scenario 2 & 3 sites) that the Council can focus on to maximise development in the zone, and we make site specific recommendations on these below.
8.2. Financial modelling findings
WHOLE ENTERPRISE ZONE The following table summarises the overall findings of the financial modelling at the EZ level for each development scenario:
EZ Overall Scenario 1 Scenario 2 Scenario 3
Projected Rates Income* £32.25 Million £85.34 Million £89.01 Million
Contingency (on income) @ 10% -£3.23 Million --£8.53 Million -£8.90 Million
Capital Exp. Financing Costs -£9.35 Million -£24.93 Million -£24.93 Million
Revenue Exp. 0 0 0
Break even year (model in surplus) 2017 (year 6) 2017 (year 6) 2017 (year 6)
Peak deficit amount -£0.28 Million -£0.28 Million -£0.69 Million
Peak deficit year 2016 (year 5) 2016 (year 5) 2016 (year 5)
Surplus/Deficit (incl. Contingency) £18.05 Million £47.61 Million £50.72 Million
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This demonstrates the significant surplus of £18.05 Million that is already being generated by the completed development in the EZ. This income is certain and available to be reinvested by the LEP. When Scenario 2 sites are modelled, this surplus increases by £29.56 to £47.61 Million. This more than doubles the surplus generated in the EZ and highlights the importance of prioritising interventions that increase the certainty of this income. Some of these schemes are nearing completion and so pose less of a risk, such as the Vulcan Works, whilst sites such as those proposed for industrial development (Sites 1,2,3 & 7) require a greater level of intervention to accelerate their delivery. The Scenario 3 sites are considered riskier in market and delivery terms. They rely on the success of Scenario 2 schemes (such as Four Waterside and Vulcan Works) to strengthen the town centre office market and grow demand for new town centre office accommodation. If these sites come forward in line with assumptions, this could generate an additional surplus of £3.11 Million, a total across the EZ of £50.72 Million. This figure represents the development potential of the whole EZ.
SITE SPECIFIC – SCENARIO 1 SITES The relocation of the Cosworth factory at Site 11, St James Mill Road Riverside demonstrates a good example of the benefit of EZ designation. The site generates a positive surplus to the zone of £1.76 Million after a GPF repayment of £1.20 Million is paid down. The remaining sites are split into ‘surplus’ and ‘deficit’ sites, as follows. The negative position of the deficit sites is attributable to the demolitions, the total impact of the lost business rates being greater than the new business rates generated by the new development.
Deficit sites Surplus sites • Site 3D Ross Road • Site 1 Duston Mill Lane • Site 5B Lincoln Street • Site 7C Edgar Mobbs Way South • Site 8 Harvey Reeves Road • Site 12 Northampton Railway Station • Site 9A St James Mill Road • Site 15 St Peter’s Car Park • Site 10 St James Mill Road East • Site 16 National Grid Site • Site 13 St Peter’s Way (Innovation • Site 17 Project Angel (One Angel Square) Centre) • Site 17 Project Angel (The Brewery) • Site 14 Freeschool Street • Site 18 Albion Place (Premier Inn) • Site 19 St John’s • Site 20A Bridge Street Cc • Site 20C Carlsberg Cc • Site 21 Avon/ Nunn Mills cc
The development of One Angel Square at Site 17, Project Angel, produces the most significant positive impact with a surplus of £15.27 Million. The Scenario 1 sites raise an additional issue that requires further consideration. Some sites are allocated to be brought forward for residential development and therefore will not generate any business rates income. However, demolitions have already occurred, and these sites have a negative impact on the overall EZ. We are aware of MHCLG taking a practical approach to this situation and recommend that the Council commences discussions to understand whether these sites can be disregarded.
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SITE SPECIFIC – SCENARIO 2 SITES Site 12, the Railway Station car park, and Site 13, Four Waterside are the only Scenario 2 sites that have a capital cost attributed to them. Four Waterside produces a surplus of £1.42 Million, an encouraging result in the context of the strategic importance of this site. The Railway Station car park at Site 12 generates a deficit of -£4.91 Million. Site 17, Vulcan Works, also produces a surplus of £4.36 Million, but does not have any capital costs attributed to it. The industrial development at Sites 1,2,3 & 7 provide the opportunity to grow the business rates surplus of the wider EZ. These represent strong development opportunities and should be phased so as not to compete with one another. We discuss site specific recommendations for these sites in Section 7.3. These industrial sites all produce a surplus, although do not have any capital costs attributed to them.
SITE SPECIFIC – SCENARIO 3 SITES Neither Scenario 3 schemes have any capital costs attributed to them, or business rates lost due to demolitions. Site 16, Horizon Park generates a surplus of £1.5 Million, although the heritage aspect of this scheme adds complexity, cost and risk. The office element of the scheme at Site 18, Swan Street generates a surplus of £1.61 Million.
8.3. Site specific recommendations This report has identified a number of sites with potential for further development, these are the Scenario 2 & 3 sites.
8.3.1. FOUR WATERSIDE The Council is progressing the Outline Business Case for the Four Waterside scheme which considers in detail scheme viability and proposed funding mechanisms, setting out a clear market failure and case for intervention. The Council is committed to the delivery of the site and proposes to take on significant viability and letting risk to accelerate its delivery. Given the current economic climate, the Council has confirmed that it will undertake further due diligence to ensure that the research underpinning the development OBC is up to date and reflects on-going market conditions. As part of this, it is recommended that the market demand for the office and hotel element of the scheme is reviewed, given the current economic uncertainty and difficulty in forecasting the impact this will have on occupier, operator and investor confidence.
8.3.2. SITES 1, 2, 3 AND 7 Sites 1, 2, 3 and 7 represent strong potential for industrial development. The market review has identified that Sites 2 and 7 could accommodate similar sized industrial units and should therefore be phased so as not to compete with each other. The business rates modelling has demonstrated that Site 7 generates the highest business rates surplus, and so provides an obvious focus for intervention. Site 7 also does not suffer from flood zones issues, as does Site 2. The shape of the site and flood zone issues at Site 1 means that this site would accommodate smaller industrial units of say 5,000 ft². Site 3 does not have flood zone issues so development can proceed sooner. We have assumed that Site 3 can accommodate larger industrial units ranging from 25,000 ft² to 75,000 ft². However, a limitation of the current financial modelling is that we do not know the aspirations of the current landowners and their willingness to proceed with development. As such, early engagement with these landowners is recommended to commence discussions and aid a better understanding of the appropriateness of the current development assumptions.
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We are not aware that site investigations have been undertaken at any of these sites, other than Site 3, and so our understanding of site-specific development constraints, and their impact upon development potential, is restricted. Further work to understand development constraints, site capacity and development viability will be required to refine assumptions for the sites and understanding of their impact on the EZ. It is worth noting that with the exception of Site 3 we are not aware of who owns the sites and their appetite for development, and this could have an impact upon our assumed delivery timescales. Site 3a is owned freehold by the Council, and that the football club own the long leasehold and that the wider site (incorporating the former Athletics Ground, Site 3b and 3c) has abnormal, enabling & remediation issues estimated at £13 million. To reflect this we have pushed the delivery timescales out to 2028. Given the strong employment creation potential of these sites and their fit with the EZ objectives, further work should be undertaken to understand what interventions the Council can invest in and whether a funding case can be made to the LEP to increase certainty of these sites being delivered and thereby maximising their potential impact on the whole EZ.
8.3.3. SITE 16 HORIZON PARK AND SITE 18 SWAN STREET For both schemes, development proposals are in the early stages and further work will be undertaken to better understand scheme viability and deliverability as these proposals are developed.
8.3.4. RESIDENTIAL DEVELOPMENT SITES Some sites are allocated to be brought forward for residential development and therefore will not generate any business rates income. However, demolitions have already occurred, and these sites have a negative impact on the overall EZ. We are aware of MHCLG taking a practical approach to this situation and recommend that the Council commences discussions to understand whether these sites can be disregarded.
8.4. Concluding thoughts
8.4.1. KEY SUCCESS STORIES The Northampton Enterprise Zone has made strong progress to date, with over 50,000 m² of new development that has created a total projected rates income of £32.25 Million (Scenario 1 sites). Overall this produces a total surplus of £18.05 Million over the life of the EZ, which creates a significant and certain income stream for the LEP. Key success stories include: • Site 17, Project Angel, One Angel Square • Sites 13, The University of Northampton Innovation Centre • Site 12, Northampton Railway Station • Site 7C, Hellermann Tyton development • Site 18, Albion Place, Premier Inn The zone has the potential to create an additional £32.67 Million of a total surplus over the life of the zone, £29.56 Million of which is from development that we determine to be ‘realistic’ (Scenario 2 sites), and an additional £3.11 Million which could be realised through development of the ‘optimistic’ Scenario 3 sites. This is a total surplus across the whole EZ of £50.72 Million that represents the development potential of the whole EZ. This represents huge potential but will
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require up front intervention from the Council to enable delivery of the Scenario 2 & 3 sites and realisation of the new business rates income. The Council is committed to the success of the zone, and this is demonstrated by the proposed funding interventions at key schemes such as Four Waterside and The Vulcan Works. These schemes are targeted at growing the Northampton economy by strengthening the town centre office market. Building on the success of the Innovation Centre, these schemes combined will create a varied office accommodation offer to appeal to a wide range of businesses, from those that require the support of the Innovation Centre, through to maturing businesses that require smaller and flexible terms, and larger or mature businesses that will be attracted by the Grade A waterside accommodation at Four Waterside. The Council is progressing its Business Case for significant investment into Four Waterside, which will create a positive surplus to the LEP. To maximise the overall success of the EZ, it is our view that the Council should focus on developing cases for the development of its industrial sites at Sites 1, 2, 3 and 7. We have discussed the phasing of these sites to avoid in-competition, although the reality will be led by discussions with the current landowners to understand their willingness/ ability to bring these sites forward for industrial development, which will enable the Council to focus on the site’s that offer the best potential for accelerated development. These sites could provide a strong case for the Council to acquire one or more sites to take control and act as a catalyst for further development in these locations. Overall, this report has identified the significant success already achieved by the zone and sets out some further work that the Council can progress to ensure that the zone continues to deliver new development, jobs and growth for Northampton and the wider LEP area.
8.4.2. PRIORITY SITES The top priority sites are as follows: • Site 13 – Four Waterside: The development of this site is considered a top priority for the Council to meet its ambitions to strengthen the town centre office market. • Site 7 – Edgar Mobbs Way: If this land was developed we are confident it would be highly attractive to occupiers and investors. • Site 12 – Railway station car park: This workstream is being progressed and we have been advised that the car park will be delivered in 2021. • Site 17 – Vulcan Works: This development is also being progressed and we understand the scheme will be delivered in 2021. • Site 6 – Wrefords Extension: We understand that the occupier is progressing this application. Overall, these priority sites require up-front investment of £11,245,187, comprising £6,245,187 to fund the market rent subsidy at Four Waterside and £5,000,000 to fund the capital cost of the Railway Station car park.
8.4.3. NEXT STEPS Delivery of Site 13, 12, and 17 are underway and plans are being progressed. The delivery of Site 6 is in private sector control. To maximise the overall success of the EZ, it is our view that the Council should focus on developing cases for the development of its industrial sites at Sites 1, 2, 3 and 7, with an emphasis on the delivery of Site 7. As a priority the Council should undertake the following:
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• Detailed discussion with landowner to understand their aspirations for the site and implications on the development assumptions contained in this report, notably around delivery timescales. • Further work to understand development constraints and impact on development assumptions; • Development viability and further financial modelling to test the affordability of the development constraints. A development appraisal will identify the funding gap for the site, and then financial modelling can be used to determine whether the EZ model can afford to pay for this gap, i.e. whether site specific scenario produces an overall surplus or a deficit. If the former this forms the basis of a funding ask. Sie 3a also represents a significant development opportunity. Under the current assumptions we have assumed that the site will not be delivered until 2028 due to site abnormals and ownership constraints. We advise that the Council undertakes the following: • Further financial modelling to understand the affordability of the site abnormals in the context of EZ funding, i.e. whether the site is overall a ‘drain’ on the EZ or whether it generates a surplus.
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Appendix A Enterprise Zone map
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Appendix B Detailed summary of the Northampton Waterside EZ sites
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Site 1: Duston Mill Lane
SITE SUMMARY The Duston Mill Lane site spans 3.3 Ha and is located to the West of Northampton. The site is a plot of undeveloped land that is parallel to the A5076, one of the main roads into and around Northampton. A significant proportion of the site located within Flood Zone 3.
PROGRESS TO DATE The site is operated as the Duston Mill Northampton Showground and Exhibition Space, used as an open showground and exhibition space for hire. The site is commonly used for car boot sales, food festivals and other local events. A carwash was developed to the north of the site in 2019 with a rateable value of £10,000 per annum which will be retained by the LEP. Part of the site secured full planning permission in 2013 for a 112-bedroom hotel, spa and leisure facility. We are not aware that development has commenced and have assumed that the planning permission will now have lapsed.
C&W COMMENTARY The developable area of the site is restricted by the flood zone. Given the site’s town centre location and good access, it is suited to light industrial uses B1c, B2 and B8. We would envisage that this site would be brought forward as small industrial premises up to 5,000 ft². Any land that falls within the flood zone 3 allocation can then be utilised as car parking or open storage land. There is also potential for the site to attract roadside uses including trade counter or a drive-thru facility.
BARRIERS TO DELIVERY A significant proportion of the southern end of this site is located within flood zone 3, which places restrictions on the nature of permitted development.
Site 2: Upton Way
SITE SUMMARY Site 2 extends to 1.8 Ha in total and is located off Upton Way. The site is split into the following two sites: Site 2A – The northern section of the site extends to 0.5 Ha. The site has direct access to the A5076. Site 2B – The southern section of the site extends to 1.3 Ha and adjoins Site 2A. The site is bound by Duston Mill Lane and Upton Way. A significant proportion of the site is situated in Flood Zone 3.
PROGRESS TO DATE The site is currently used as car parking for match days and there is no development on site. We are not aware of any development proposals for the site.
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C&W COMMENTARY Site 2a and 2b provide an attractive opportunity for industrial development. Again, given the town centre location and good road access, the site is well suited for a light industrial use. Given the size and shape of the site, Site 2 could accommodate medium sized units up to 40,000 ft².
BARRIERS TO DELIVERY A significant proportion of Site 2b is located within Flood Zone 3, which places restrictions on the nature of permitted development.
Site 3: Sixfields & Walter Toll Way
SITE SUMMARY Site 3A – Extends to 4.2 Ha located directly off Walter Tull Way to the north. The land has been cleared and is used for match day parking, the remainder of the site is grassed, with no clear development. Site 3B - a 1.6 Ha plot of land accessible via Walter Tull Way. The site is currently being used as a recycling centre. Site 3C - a tarmacked surfaced strip of land that is currently being used as car parking. This site is adjacent to Sixfields Leisure Park. Site 3D - a 5.1 Ha plot located to the east of the wider site. The site is mixed use and has a number of businesses operating from it, including Northampton Motor Centre, Hanson Ready- mixed concrete and Dynamic Office Seating. Site 3E – a 8 Ha plot located off Walter Tull Way. The site is occupied by the Sixfields Stadium which is home to Northampton Town Football Club and associated uses including the former Athletics stadium.
PROGRESS TO DATE Other than mentioned above there has been no further development on these sites, with the exception of Site 3D where there have been two new developments on this site since the start of the enterprise zone: • Unit 1b, Leo House Ross Road • B-Stone Ltd, 15a, Ross Road In addition to this, we believe that following five buildings have been demolished since the start of the EZ, the lost business rates income will therefore need to be netted off: • Unit B, Leo House Ross Road • Former Dalepak Unit • Site 2 Ex-Sixfields Auto Breakers • Site 4 Ex-Sixfields Auto Breakers • Unit A Pioneer Works
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C&W COMMENTARY Site 3a would be well suited to industrial development. Sites 3b, 3c and 3e are not deemed appropriate for further development given the existing uses. Whilst there is a small likelihood of Site 3d being developed at a point in the future, in our view it should continue to operate as lower quality industrial accommodation, this works well in this location and meets a business need. It is our view that Site 3a presents an attractive development opportunity.
BARRIERS TO DELIVERY Site 3A – Viability work undertaken in 2016 has identified remediation requirements and other site abnormals. Site 3B - No further development assumed. Site 3C - This site is a relatively small plot of land with only 0.5 Ha. No further development assumed. Site 3D - No further development assumed. Site 3E - No further development assumed. Viability work undertaken in 2016 has identified remediation requirements and other site abnormals at Site 3A. As far as we are aware the former athletics track does not have any remediation requirements.
Site 4: Franklin’s Gardens
SITE SUMMARY Site 4 extends to a total area of 9.4 Ha and centres around Franklin’s Gardens, which includes a number of rugby pitches. The site is 0.3 miles from the Saints Rugby Ground. The site is split into the following three areas: Site 4A - This site extends to 6.6 Ha of land centred around Abbey Street. The site currently consists of two plots of marked sports pitches. Site 4B - This site extends to 3.4 Ha of land and is located around the existing Saints Rugby Ground. Site 4C - This site extends to 0.1 Ha and is currently home to the National Lift Tower, a research and development centre specialising in testing a number of different devices including the safety of working at height devices. This building was constructed before the EZ designation.
PROGRESS TO DATE Overall, development within this site has been limited with the main focus for the site being the Saints Rugby Ground. We believe that the Saints Ground has recently undergone works to add an additional seating stand, however we do not believe that this has created additional business rates.
C&W COMMENTARY At present the site does not have any accommodation for future development, as it is all fully occupied. The Franklins Gardens and Saints Ground on sites 4A and 4B work well together and are a key opportunity for tourism within the town centre. However, C&W believe that in the future, if landowner aspirations change, this site could be a strong site for industrial space given the size and shape of the plot of land. It is worthwhile noting that this is a long-term approach for the site,
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which should only be brought forward if the land at Franklins Garden becomes surplus to requirement.
BARRIERS TO DELIVERY Site 4 has limited development space available at present and so it is likely that the existing operations would need to relocate in order to facilitate development. However, at present the existing uses focus around the Saints Ground and Franklins Gardens, both of which are successful and attract visitors to this area. Therefore, unless stakeholder aspirations change for the site the development of this site should not be explored any further.
Site 5: Sharman Road and Lincoln Street
SITE SUMMARY Site 5 extends to 3.5 Ha and is situated adjacent to Site 4. Site 5 is split into two smaller sites: Site 5A - Known as Sharman’s Road Lake, this site extends to 2 Ha. This site consists of a small lake and 0.58 Ha of industrial land to the north east. Site 5B – Known as Lincoln Road, this site extends to 1.5 Ha and incorporates a number of industrial buildings on site. As far as we are aware the bus depot has been demolished.
PROGRESS TO DATE Site 5A – In 2015, the 257 m² workshop of Reg Holmes Tail Lift Services Ltd was demolished. We are not aware of the reasons for this but do not believe that further development is proposed.
Site 5B – The following four buildings have been demolished since the inception of the EZ: • Unit 1 Lincoln Road R/O Bus Station • Charles Goad House • St James Bus Station St James Road • Northampton Transport Social Club
C&W COMMENTARY Site 5 overall has a limited amount of developable space available. Therefore, it is unlikely that significant development will be brought forward on this site, however there is potential that if site 4a was developed that site 5a could be incorporated as an extension to create a slightly larger site. Site 5 overall is less desirable for industrial uses than sites 1-4, but given its surrounding uses is unlikely to be delivered for any other use.
BARRIERS TO DELIVERY Site 5A – No surplus land available or appropriate for development. Site 5B – We are not aware of development proposals for this site.
Site 6: Wreford’s
SITE SUMMARY Site 6 consists of 1.2 Ha of land. The site is accessible off Edgar Mobbs Way and is currently occupied by Wreford’s Transport, a local and long-established transport and warehouse storage company.
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PROGRESS TO DATE Wrefords successfully secured planning permission for the erection of a 1500 m² warehouse unit to be constructed at the north of the site. The application stated that this was part of a long-term approach that Wrefords had to keeping and potentially expanding further in the future. We do not believe that the construction of this unit has commenced.
C&W COMMENTARY This site is owner-occupied by Wrefords who have aspirations to expand their aspirations. The Council should continue dialogue with Wrefords to ensure they are well placed to offer business support as required.
BARRIERS TO DELIVERY n/a
Site 7: Edgar Mobbs Way
SITE SUMMARY Site 7 extends to 7.1 Ha with good prominence onto Edgar Mobbs Way 0.8 miles from the Saints Ground. The site is divided into the following four sites: Site 7A - A triangular plot of land located to the North of Edgar Mobbs Way. The site consists of 2.7 Ha of tarmacked land bounded by Franklin’s Gardens to the north and Edgar Mobbs Way to the south. The site is used for match day parking for the Saints Ground. Site 7B - This site consists 2 Ha of tarmacked land. The site is bound to the north by Edgar Mobbs way and to the south by the River Nene. The site is used for match day parking for the Saints Ground. Site 7C - This site is located directly opposite the Wreford’s transport site (Site 6). The site consists 2.1 Ha of land in total. Circa 0.85 Ha is occupied by Waterside House, a new 3,948 m² warehouse constructed in 2017 which is occupied by Hellermann Tyton, leading suppliers of products for fastening, fixing, identifying and protecting cables. The remainder of the site was granted planning consent in October 2019 for a 1,434m² waste transfer station with an ancillary office/welfare building of 284m². As far as we understand there is no further land available for development. Site 7D - A small rectangular plot of land consisting 0.3 Ha of land. This site is located on the edge of Storton’s Pit Nature Reserve.
PROGRESS TO DATE We do not believe that any development has taken place on any of the sites since the inception of the enterprise zone, with the exception of Site 7C. An industrial unit totalling 3948m² was completed on Site 7c in 2017. We believe that this is listed in the Rating list as the following premises: • Waterside House, Edgar Mobbs Way, Northampton, NN5 5JE A number of planning applications have been also been submitted for the remaining area of 7C, following the development of Waterside House. Most recently planning approval was granted for a 1434m² waste transfer station with an ancillary office/welfare building of 284m². Planning approval for this scheme was granted in October 2019.
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C&W COMMENTARY Site 7 provides an attractive industrial development opportunity. Given the proximity to the town centre and good access to the local road network, Site 7 would be well suited to light industrial uses, given the surrounding uses are industrial at present. The site currently operates as match day parking and so consideration would need to be given to the relocation of this service. The site could accommodate medium sized buildings up to approx. 40,000 ft². This is similar to the offer at Site 2, and so care will need to be taken to prevent these sites from competing and/ or saturating the market.
BARRIERS TO DELIVERY Site 7D is within close proximity to the Storton’s Pit Nature Reserve and so any development that takes place on this site will need to make special consideration for the ecological impact that it could have.
Site 8: Harvey Reeves Road
SITE SUMMARY The site at Harvey Reeves Road consists 9 Ha of land. There are a number of small businesses operating from the site, many of which occupy light industrial accommodation.
PROGRESS TO DATE Since the creation of the Enterprise Zone in April 2012, this site has undergone a number of changes. The works across this site have consisted of demolition works at Millbrook Close and construction at Giffard Court. All of the building that have been demolished within this site have been located at Millbrook Close, however the timings of demolition have varied from 2013 through to 2019. The details of the buildings that have demolished are listed below: • Unit 2 At 2b Millbrook Close • Unit 4 Giffard Court • 30/32 St James Mill Road • Unit 1 At 2b Millbrook Close • Unit 2 At 2b Millbrook Close • Unit 4 At 2b Millbrook Close • Unit 2a At 2b Millbrook Close Off James Mill Road Following the demolitions of the buildings listed above, there has also been a number of new developments within the Site 8 boundary. Details of the buildings that have been constructed since the start of the Enterprise Zone are below: • 1 Harvey Reeves Road • Ground Floor Unit 4 Giffard Court • Back 1st Floor Unit4 Giffard Court • Front 1st Floor Unit4 Giffard Court • Unit 3 St James Trade Park
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C&W COMMENTARY Site 8 is currently being used for predominantly industrial space, with some ancillary office space. At present, this site is fully operational with limited room for new development and so no intervention is needed.
BARRIERS TO DELIVERY n/a
Site 9: St James Mill Road and Maltings
SITE SUMMARY This site consists of 17.2 Ha of land and is one of the largest sites within Northampton Waterside Enterprise Zone. The site can be split into two smaller sites: Site 9A- The St James Mill Road site is home to a number of businesses and predominantly consists of industrial units and open storage land. This site consists 17.1 Ha of land. Site 9B- The Maltings site is 0.1 Ha of land located directly adjacent to the BP Petrol station, accessible off the A5400.
PROGRESS TO DATE In 2015, we believe that two premises within Site 9A were demolished. One of the demolitions that took place on site was the demolition of the 13,788 m² Cosworth Ltd factory (Cosworth Ltd have subsequently developed a new and larger 11,746.5 m² unit at Site 11, see below). The second demolition was a 1,334 m² workshop at 35/37 St James Mill Road. We also understand that in 2017 a small premises of just 28 m² was constructed at Unit 24 St James Mill Road.
C&W COMMENTARY Site 9 forms part of a well-established industrial area and no further intervention is required.
BARRIERS TO DELIVERY n/a
Site 10: St James Mill Road East
SITE SUMMARY Site 10 consists 5.1 Ha of land developed as warehouses and workshops at present. The site is bound by the railway line to the West, this line leads directly into Northampton Railway Station.
PROGRESS TO DATE We understand that the following demolitions have taken place at Site 10 since the inception of the EZ: • 77/83 & 87 St James Mill Road
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• 93 St James Mill Road In addition to this, we believe that the following new premises has been constructed since the start of the enterprise zone: • 70 ST JAMES MILL ROAD (UNIT 3)
C&W COMMENTARY Site 10 forms part of a well-established industrial area and no further intervention is required.
BARRIERS TO DELIVERY n/a
Site 11: St James Mill Road Riverside
SITE SUMMARY Site 11 is a small section of land, that runs parallel to the River Nene. The site extends to 2 Ha and is irregular in shape. There are 3 buildings on site comprising two industrial premises and one fast food restaurant. The southernmost element of the site is long and thin in shape and runs parallel to the River Nene.
PROGRESS TO DATE The Cosworth Ltd factory relocation took place on Site 11 in 2015, providing the delivery of a new 11,746.5m² factory. The details of these premises are as follows: • Cosworth Ltd, The Octagon, St James Mill Road
C&W COMMENTARY As with Sites 9 & 10, this site forms part of a well-established industrial area and no further intervention is required.
BARRIERS TO DELIVERY n/a
Site 12: Northampton Railway Station
SITE SUMMARY Site 12 is the location of Northampton Railway Station. The station is located relatively centrally in Northampton and is one of the most northerly Enterprise Zone sites. In total this site consists 5.4 Ha of land.
PROGRESS TO DATE Significant development works have taken place since the start of the Enterprise Zone at Site 12. The previous Northampton Railway Station was demolished in 2014/15 to make way for the brand-new modern design railway station. In order to facilitate the new development, we believe that following five buildings were demolished:
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• Traveller's Fare Castle Station • Allen and Kennedy, St Andrews Road • Bank of Scotland ATM • Units 1 & 2 Castle Station • Vodafone at Northampton Station This enabled delivery of the following new development: • W H Smith Unit A, Northampton Railway Station, Black Lion Hill • Photo Booth At, Northampton Railway Station, Black Lion Hill • Starbucks Unit B, Northampton Railway Station, Black Lion Hill • Unit C Lower Level, Northampton Railway Station, Black Lion Hill • Unit D, Northampton Railway Station, Black Lion Hill Northampton Borough Council is developing proposals for a new multi-storey car park with 1,300 spaces to replace the existing 866 space two storey deck car park.
C&W COMMENTARY We understand that there is demand for additional station car parking, which will make the railway station and town centre more accessible.
BARRIERS TO DELIVERY n/a
Site 13: St Peter’s Way
SITE SUMMARY Site 13 comprises a plot of land located south of the A5400. The site extends to 2.9 Ha and is bound by the A4500 to the north and east, the River Nene to the south and a railway line to the west. Site 13 represents the most significant opportunity site within the EZ. The University of Northampton’s Innovation Centre is located to the north west of the site, and cleared development land that has been masterplanned and is known as ‘Four Waterside’ across the remainder of the site.
PROGRESS TO DATE The University of Northampton’s Innovation Centre was completed in 2015. It provides 42 flexible office units, a café and conference space, and a full range of business support services. To enable delivery of the scheme the following units were demolished: • Adrian's Autos Ltd • National Tyre and Autocar • Oddbins, St Peters Way • R/O National Tyre and Autocar • J C Decaux off corner of Tanner Street
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Four Waterside is owned by Northampton Borough Council and is masterplanned to provide up to 7,800 m² of residential accommodation, up to 4,738 m² (51,000 ft²) NIA of Grade A office accommodation and up to 20,000 m² new hotel accommodation. (Please note it is assumed these areas are gross internal). We have had sight of the draft Outline Business Case for Four Waterside that makes the case for a public sector funding approach by way of a mix of EZ funding through the LEP to address the viability gap and the Council taking on letting risk either by a ‘wrapper lease’ or through a rental guarantee.
C&W COMMENTARY The Innovation Centre has been successful and generates a useful and certain income to the EZ. Four Waterside provides an ambitious redevelopment opportunity that is well aligned to the Enterprise Zone employment agenda. The Council has aspirations to grow the town centre office market, and the scheme’s location adjacent to the innovation centre provides more mature office space for innovation businesses to ‘grow’ into. The draft OBC states that the new Grade A offices will create demand for the hotel, it is worth highlighting that this will depend upon the scheme attracting ‘national’ occupiers, local occupiers typically don’t generate hotel demand. In the absence of on-site demand, the OBC states that the hotel will compete with existing hotels in the town centre. The scheme faces two key challenges that are currently preventing delivery – scheme viability and market demand. It is with this in mind that the Council is considering options to de-risk the development through a number of funding mechanisms including a ‘wrapper lease’ to provide certainty of income to a developer and therefore address demand concerns, and funding through the business rates mechanism to address viability. Without this bold approach, the scheme is highly unlikely to be delivered, as evidenced by failure to deliver on the development agreement with Kier Construction.
BARRIERS TO DELIVERY Development viability – Generally speaking market rents of over £21 ft² are required for office development to be financially viable, before abnormal costs are taken into account. This poses a financial risk for schemes in untested ‘new’ markets as is the case for Northampton town centre. Market demand for both Grade A office space in a town centre location, as well as demand for hotel beds. Flood risk – the site faces significant challenges in suitable development and flood alleviation measures.
Site 14: Freeschool Street
SITE SUMMARY The Freeschool Street Site comprises 1 hectare (2.47 acres) of land located in Northampton town centre and is well located situated 0.3 km (6 minutes walk) from Northampton Railway Station and 0.6 km (9 minutes walk) from the town centre. The site is bound to the east by the A508, to the south by the A4500 and to the west by Freeschool Street. Existing site uses include approximately 7 light industrial units totalling circa 1960 m² (21,097 ft²), a public pay and display surface level carpark and Big Noises Studios, a 3-storey red brick building situated on the corner of Gregory Street. The industrial units are poor in quality and are
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mostly occupied by car sales and repairs centres. The car park is poorly utilised, and we understand that is mostly used by visitors to the town centre.
PROGRESS TO DATE The following buildings have been demolished since the establishment of the EZ: • 50 The Green, Vehicle Repairs • 1 The Green, Vehicle Repairs • Gnd and 1st Flrs 12 Gregory Street The following development has occurred: • 1 The Green • 1st Flr 12 Gregory Street • Car display Land at 1 The Green
C&W COMMENTARY In 2005, a residential-led masterplan was designed for the re-development of the site. Since this, the masterplan has not been delivered and so C&W were instructed to assess the viability of the site for a similar scheme. C&W have since reported that the residential scheme would be unviable both due to significant amounts of acquisition and demolition being needed at the site to facilitate development. Residential development is proposed at the site, this does not generate business rates and so this has been excluded from our modelling.
BARRIERS TO DELIVERY The site is in multiple ownership, and the Council owns approximately 19% of the site. As far as we are aware there are no aspirations from existing landowners to work collaboratively to deliver a comprehensive scheme. The existing accommodation on the site works well in this location and site assembly could be an expensive process. Demolition also adds additional cost. The site is proposed for residential uses, however residential land values restrict development viability. In a separate report prepared by C&W the Council has been advised to consider the affordability of the delivery of this site in the context of wider town centre priorities to understand whether they have the appetite to pursue development. In addition to this, we are aware that the site will require a mitigation strategy due to a 19th century cellarage being located just 1m below the site.
Site 15: St Peter’s Car Park
SITE SUMMARY Site 15 consists 1.6 Ha of land located to the north of St Peter’s Way. The site is currently used for town centre car parking. The site is split into two smaller car parks; Commercial Street South, currently operated by Northampton Borough Council and Commercial Street, currently operated by NPC.
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PROGRESS TO DATE Development on this site has been very limited. A reduction of 6m² of car parking space has taken place resulting in the deletion of one rateable hereditament and the creation of another and a slight change to the rateable value as a result. This has been reflected in our modelling.
C&W COMMENTARY In 2012, a car parking strategy was produced for Northampton which established that both of these car parks had strong occupancy rates, particularly on weekends. It is our understanding that these car parks continue to benefit from good occupancy rates and it is our view that they are in their best use and that no further intervention is required.
BARRIERS TO DELIVERY n/a
Site 16: National Grid Site
SITE SUMMARY Site 16 is the site of the former National Grid building. The site consists a total land area of 4.1 Ha and is located South of St Peter’s Way.
PROGRESS TO DATE A new Lidl supermarket extending to 2,758 mt² was completed in 2017. In order to facilitate development of the supermarket the former British Gas Trading offices were demolished.
C&W COMMENTARY The site is fully developed out and no further intervention is required.
BARRIERS TO DELIVERY n/a
Site 17: Project Angel
SITE SUMMARY Site 17 consists 1.6 Ha of land located within the town centre core. The site is bound to the north by Angel Street and stretches southwards towards the A5123. The site is occupied by ‘One Angel Square’, the new headquarter office space for Northamptonshire County Council, completed in 2017. The 2019 Northampton Town Centre Masterplan sets out ambitious proposals for ‘The Vulcan Works’, which includes the redevelopment of the existing Grade II listed building into a creative workspace for up to 100 small businesses. The scheme is owned by Northampton Borough Council who are currently seeking an operator, with construction due to PC in 2021. The Brewery, Kingswell Street is also located within Site 17. This scheme comprised the restoration of a derelict brewery in 2014, which led to the opening of Albion Brewery Bar in 2015. We are not currently aware of any other development proposals for Site 17.
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PROGRESS TO DATE Substantial development has taken place on Site 17. The following ‘new’ hereditaments have been created: • Gnd & Bst Flrs 54, Kingswell Street • 2 Nd Flr Tower 54, Kingswell Street • 3 Rd Flr Tower 54, Kingswell Street • 1 St Flr Tower 54, Kingswell Street • Workshop 1st Flr Tower 54, Kingswell Street • Sugar Store 2nd Flr Tower 54, Kingswell Street • 1 St Flr Corner Block 54, Kingswell Street • 2 Nd Flr Corner Block 54, Kingswell Street • One Angel Square 4, Angel Street The following premises have been demolished to enable delivery of the above schemes: • Linells Motors, Fetter Street • 1st & 2nd Flrs Corner Block Kingswell Street • 1st, 2nd, 3rd flrs 54 Kingswell Street • 54 Kingswell Street • Unison, Angel Street • Northampton Victim Support, Angel Street • Northampton County Council, Angel Street
C&W COMMENTARY The Council sets out in the 2019 masterplan its ambition to revitalise the cultural quarter, and to build on the momentum of the success of One Angel Square. The Vulcan Works is due to complete in 2021 and will provide flexible office accommodation to appeal to smaller businesses, with aspirations that as these businesses mature it will create increased demand for town centre office space. Discussions with local agents have been mostly supportive of the proposals and following the success of the flexible office scheme at Market Square the Council is confident that the scheme will be successful.
BARRIERS TO DELIVERY n/a
Site 18: Albion Place
SITE SUMMARY Site 18 consists 0.4 Ha of land located in Northampton town centre. The site is accessible via Albion Place and Swan Street.
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A new Premier Inn located at St John’s Street was completed in 2015. The remainder of the site comprises two car parks known as Albion Place and Swan Street. Both sites are owned by the Council as far as we are aware.
PROGRESS TO DATE The following demolitions were undertaken in 2014/ 2015 to facilitate the delivery of the new Premier Inn Hotel. • Royal Theatre, St John's Terrace • Garage No.1, St John's Terrace • Garage No.2, St John's Terrace • Garage No.3, St John's Terrace The Council has undertaken initial site masterplanning to set out a vision for the Albion Place. Three high level options have been prepared for the site that consider various residential development including student accommodation, housing and apartment development. As this is not commercial development (i.e. does not generate business rates) this has been excluded from our modelling. Similarly, high level proposals have been prepared for Swan Street that include a mix of residential and commercial uses.
C&W COMMENTARY The Premier Inn provides a ‘certain’ income which will accumulate throughout the life of the EZ. Proposals for Albion Place do not provide business rates and so have been excluded from our modelling. Proposals for Albion Place do not generate business rates and so have been excluded from our modelling. The development at Swan Street has been
BARRIERS TO DELIVERY The proposals for Swan Street include a significant proportion of commercial office & leisure space. As proposals for the site are developed in more detail further work will be required to determine the market demand for these uses, particularly in the context of the significant challenges faced by these sectors.
Site 19: St John’s
SITE SUMMARY Site 19 consists 0.5 Ha of land within the main town centre area. The site is bound to the North by St John’s Street, to the East by Swan Street and to the South by the A5123.
PROGRESS TO DATE In 2012, the Northampton Borough Council car park was deleted from the Rating list allowing for the development of the St John’s Student Accommodation Block.
C&W COMMENTARY Student accommodation does not generate business rates and so has been excluded from our modelling.
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BARRIERS TO DELIVERY This site is now fully developed and no further development is proposed.
Site 20: Bridge Street, Cattlemarket Road and Carlsberg
SITE SUMMARY Site 20 extends to 3.6 Ha and is split into the following three smaller sites: Site 20A - This site is the small parcel of land located where Bridge Street and the A508 meet. At present the site is mixed use and consists a total of 1.8 Ha. Businesses operating from this site include Kwik Fit, The Malt Shovel Tavern, Practical Car and Van Rental and the Sakura Restaurant. Site 20B - This 0.1 Ha site located to the south of Site 20A. The site is a small triangular piece of land located opposite the Carlsberg factory. At present EVS Valeting Service are operating from the site. Site 20C - This site is located to the south east of the Carlsberg Factory. The site extends to 1.7 Ha and is easily accessible via the A508. This site is owned and occupied by Carlsberg, who have now developed a bottling plant on the site, as an extension to the existing factory.
PROGRESS TO DATE Site 20A - Two rateable hereditaments have been deleted from the list for this site since the enterprise zone was founded in 2012. We believe that these two deletions have resulted in the creation of a larger Kwik Fit unit and thus a rateable value uplift. Details of the deletions are as follows: • Kwik Fit 91/119 Bridge Street • Unit 2 at 91/119 Bridge Street The new hereditament creation is as follows: • Kwik Fit 91/119 Bridge Street Site 20B - We do not believe that any development has taken place on this site. Site 20C - We believe that Site 20C has been subject to the development of the Carlsberg Bottling Plant, as an extension to the original Carlsberg Factory. As an extension, we believe that the rateable value has been increased rather than a new hereditament being added to the rating list.
C&W COMMENTARY At present, this site is fully operational with limited room for new development and so no intervention is needed.
BARRIERS TO DELIVERY n/a
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Site 21: Avon, Nunn Mills and Avon South
SITE SUMMARY Site 21 consists a total of 20.5 Ha of land. This site is the only one within the Enterprise Zone that is located to the south of the River Nene. Within the wider site three smaller sites can be identified: Site 21A - 9.3 Ha of land located in the area around the existing Avon Cosmetics premises. This site runs along the River Nene to the West up until the existing residential dwellings. Site 21B - otherwise known as Nunn Mills, adjoins with Site 21A, but spans to the East alongside the River Nene. This site consists a total of 10.1 Ha of land Site 21C - 1.1 Ha of land split from site 21A by Park Avenue. We understand that this site has been developed out by the university
PROGRESS TO DATE Site 21A & B - The University of Northampton has created a Waterside Campus on this site that includes the following premises: • University of Northampton, University Drive, Northampton, NN1 5PH (BA Ref:1303910998014) • Sunley Hotel, University Drive, Northampton, NN1 5PH (BA Ref: 1303910998012) • Unit 1b, University Drive, Northampton, NN1 5PH (BA Ref: 130910998014) • Health Centre, University Drive, Northampton, NN1 5PH (BA Ref:1303910998015) • Engine Shed, University Drive, Northampton, NN1 5PH (BA Ref:1303910998016) • Unit 2, University Drive, Northampton, NN1 5PH (BA Ref:1303910998011)
C&W COMMENTARY The site is fully developed out and no further development is proposed.
BARRIERS TO DELIVERY n/a
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Claire Evans Direct: +44 (0) 121 697 7377 Office: +44 (0) 121 200 2050 Mobile: +44 (0) 7792 273820 [email protected]