lambert smith hampton agenda - issue three

AgendaIssue Three / Q1 2009Lambert Smith Hampton

Eric Pickles MP discusses the taxes threatening UK businesses

Inside this edition:» Evolution of the modern workplace» Cash flows and woes: the changing face of rent collections» Modern Glasgow: flourishing in a new era

Lambert Smith Hampton reports on the Trinity House lighthouse portfolio

The changing face of retailWoolworths: victims of the credit crunch, or simply weak retailing?

www.lsh.co.uk

In 2008 we saw the collapse of international

banking legacies, the nationalisation of UK

banks and widespread job losses as the

financial crisis spread beyond the square mile

and property.

There have been many lessons learnt, from

the corporate boardroom to the corridors of

Whitehall and it will be interesting to see how

political intervention will impact the markets

in 2009, which is already shaping up to be a

difficult year.

Substantial fiscal loosening and the

Government’s commitment to a Keynesian

economic model will undoubtedly help the

commercial property market in 2009; so too

will Gordon Brown’s latest pledge to create

100,000 jobs through public investment.

However, treasury policy specific to

commercial property has not gone far enough

to date.

At Lambert Smith Hampton (LSH) we are

sceptical about Chancellor Darling’s pre

budget report claim that the empty buildings

‘tax holiday’ will affect 70 percent of vacant

buildings. Meanwhile, port operators will be

gravely disappointed that the Government

has refused to scrap its retrospective business

rates tax claim, which threatens the future

of many of their businesses. See our indepth

report on this issue of Agenda for more on

this sensitive matter.

For most of this year, I expect the commercial property market to be under pressure, but I have no doubt we will all continue to manage our businesses responsibly through this downturn.

Occupational markets will tighten further but

on the positive side some activity will return

to the investment markets as the Bank of

England’s continued interest rate cuts combine

with a further softening of investment

yields. This will begin to make property look

attractive – always assuming that the banks

begin to lend again!

I do hope you enjoy reading our third issue of

LSH’s client magazine, Agenda, my first as the

firm’s new Chief Executive. While 2009 will

indeed be challenging for us all I am excited

about my new role and the year ahead. LSH

has a unique national platform, a strong team

of people working for the firm and most

importantly a great client list.

I look forward to the opportunity of meeting

many of you in the coming months. In the

meantime, please do not hesitate to contact

us if you have any queries or comments

regarding our business and the services that

we provide.

Philip Lewis FRICS

Chief Executive

Agenda / Issue Three / Q1 2009 / Introduction

Well…what can I say about the past 12 months without sounding like a cliché! It

has been a truly turbulent year for the commercial property industry and the wider global economy.

2 / Lambert Smith Hampton

Agenda / Issue Three / Q1 2009 / Contents

Lambert Smith Hampton Agenda MagazineIssue Three / Q1 2009

EditorSandy Townsend

Art/Production Director Nathan Turner

Content Contributors Sandy Townsend, Elizabeth Bartlett, Shirley Feeney, Louise Crush, Tom Everington, Alan Christie, Martin Treacy, Charles Partridge, Richard Wackett, Julian Welch, Eric Pickles MP

Contents02 Chief Executive, Philip Lewis reflects upon the economic climate and how commercial property has been affected

04 Eric Pickles MP speaks out In-depth commentary on tax and rating issues

05 The Pre-Budget Report’s impact upon commercial property

06 National research and market commentary from the last quarter Highlighting transactional activity, sustainability, occupier markets and deflation

08 Woolworths: the credit crunch claims another victim

10 Research round-up Market spotlights on Manchester, Birmingham, Leeds, Northampton and Rugby, and the North East

12 Going the extra mile LSH takes to the skies and seas to report on the Trinity House lighthouse portfolio

14 Evolution of the modern workplace How workplaces have adapted to technological, economic and social trends

16 Cash flows and woes The changing face of rent collections

18 City spotlight: Glasgow The reinvention of Glasgow into an economic and social hub

20 CAA legislation looms Driving cost savings and efficiency in the public sector

21 History repeats itself 236 years of LSH

22 Sport2Business Making the transition into business from sports

Lambert Smith Hampton / 3

There is now little doubt that Britain

faces a long and difficult recession.

Economic slowdown, a falling housing

market and increasing job losses mean an

uncertain future. A key plank to lessening

the impact and bringing the economy out

of decline as quickly as possible is helping

business, and particularly small business to

survive.

Yet at such a crucial time, the Government

has chosen to hit business with a whole raft

of new taxes, and the pips are beginning

to squeak. To begin with, firms face higher

business rates bills due to the cutting back of

business rate relief, coinciding with premises

being vacated as a result of the downturn,

leaving commercial landlords and businesses

alike with a substantially increased and

unwelcome bill to meet.

Property experts and industry have slammed

Brown’s empty rates move as “nothing

more than a bare-faced cash grab”. These

higher taxes will discourage regeneration,

since developers risk increased costs if new

buildings are unintentionally empty in the

current property market, particularly as the

cuts in relief have not been offset by any

reduction in business rates.

If that is not bad enough, the Government

has blundered into a £33 million tax hike on

55 British ports, forcing up the tax bills of

struggling firms, undermining the economy

and damaging British competitiveness. Local

firms are receiving massive backdated tax bills

following changes to the way that ports are

valued for business rates, from 2005.

The Government has claimed that it has no

idea what the additional tax that will be raised

as a result, but has admitted that the changes

mean a £19 million net increase in rateable

values. This is estimated to be equivalent to

an £8 million a year increase on tax bills, and

taking into account the backdating, represents

a £33 million tax hit on British ports.

There is now a real fear that many shipping

companies may switch their business to

Zeebrugge or Rotterdam, finishing journeys by

road or rail, and bypass British ports completely.

Finally, the 2005 rates revaluation saw a

number of stealth changes to hike business

rates, via transitional relief to cushion large

rises no longer being subsidised by Central

Government and via the introduction of a

higher business rate multiplier for medium

and large firms. The rates revaluation in 2010

will further increase bills for many firms and

supplementary business rates will be on top

of the new Community Infrastructure Levy on

new development. Ministers decision to cut

the complex LABGI grant incentive will only

increase the pressure on local authorities to

levy a supplementary rate to raise the ever

widening shortfall in their finances.

There is a case for ensuring the businesses

make a contribution to new infrastructure,

such as for the Crossrail scheme, but a

supplementary business rate must not be

used as a stealth tax. Any rate must involve a

democratic mechanism for local firms to back

or oppose the increase. The Government’s

proposals risk higher taxation without proper

representation.

Whitehall must not be allowed to use such

schemes to raise tax by stealth, by passing

costs that would otherwise have been funded

centrally onto local taxpayers. The rate should

only be used to pay for specific and clearly-

identified projects, such as new infrastructure,

for a fixed period.

We need our businesses to be able to compete

in a tougher and more aggressive global

market than we have seen in a generation.

Gordon Brown’s taxation must not be allowed

to be the handbrake on recovery.

Eric Pickles MP is Shadow Secretary

of State for Communities and Local

Government.

Businesses face anuncertain futureEric Pickles MP on the taxes threatening UK businesses


Agenda / Issue Three / Q1 2009 / Business Rates

Richard Wackett, LSH Rating, commented

on Chancellor Darling’s Pre-Budget Report.

Although the empty property rates

(EPR) relief announced in Darling’s

Pre-Budget Report appeared to be

helpful to landlords in the smaller secondary

sector it does not address the issues of

regeneration or encourage developers of

major schemes.

It’s a case of too little too late. The EPR exemptions don’t come into effect until next April.

At LSH we are sceptical about the accuracy of

Darling’s claim that this would see 70 percent

of buildings exempt is correct. A rateable value

of less than £15,000 will account for only a

small workshop unit or tiny provincial office.

The change in the Government’s EPR policy

shows recognition that there is a problem

for small scale commercial investors and

indicates that the empty rate legislation can

be incrementally altered.

Port-side industry will still struggle

The Government’s announcement to allow

councils to spread rates payment will relax

the pressure on businesses affected by the

revaluation. Dock users and warehouse

operators at 56 ports across England and

Wales, already struggling with the slowdown

in global shipping, were dealt a death blow

with the retrospective tax claim of up to

£1million and feared bankruptcy many

harbour-side industrial businesses.

Despite the ease in pressure, there is great

disappointment. More relief was expected by

port operators which are struggling to find

amounts demanded retrospectively.

“The VOA has made the tax grab with no

consultation – it is a stealth tax at a time when

warehouse operators and docks users are

facing the toughest economic outlook since

the depression.”

Richard Wackett, Rating

E: [email protected]

T: +44 (0)113 245 9393

There is now a real fear

that many shipping companies may switch their business to Zeebrugge or Rotterdam, finishing journeys by road or rail, and bypass British ports

Eric Pickles MPShadow Secretary of State for Communities and Local Government

LSH supports the British Property

Federation’s petition to reinstate EPR

relief to vacant commercial buildings

http://petitions.number10.gov.uk/emptythreat/


Agenda / Issue Three / Q1 2009 / Business Rates

LSH’s Weather Map: Prospects for Property report reveals that although the next two years will undoubtedly be stormy, the outlook is improving for 2011.

According to the report, the property

market and broader economy

will surpass the depths of decline

experienced in the 1970s recession by 4.4

percent in 2009/2010. But, analysis of the

past 40 years highlights that both are cyclical,

maintaining a seven year bell curve.

Growth will return in 2011 but at more

incremental levels than previous downturns.

LSH predicts that markets will recover to long

term growth averages by 2013.

Headline rents at present are holding or just

slipping across all three major sectors but

incentives, such as rent free periods, are

moving out considerably.

Lack of demand from the financial sector has

hit the office sector hard, with suffering set to

continue in the short term before returning to

growth in 2011. Ezra Nahome, LSH Head of

Capital Markets, predicts a fall in office rents

of 14 percent in 2009 and 8 percent in 2010

before starting to recover in 2011.

The retail market’s outlook remains

dependent on consumer confidence and

response to interest rate cuts. In the short

term we can expect consumer spending

to remain subdued but the beginnings of

improvement in 2010, coupled with lower

interest rates mean that the retail sector will

be the first to see an upturn.

Empty property rates continue to negatively

impact on property portfolios in the industrial

sector, coinciding badly with falling demand

and increased operating costs. Despite this,

prime headline rents have largely remained

steady. However, there is increasing evidence

that rental values are beginning to soften in

some locations.

For further information on specific

sectors, please contact:

Ezra Nahome, Investment


T: +44 (0)20 7198 2222

Tony Fisher, Office Agency


T: +44 (0)20 7198 2250

Steve Williams, Industrial Agency


T: +44 (0)20 7198 2000

Julian Welch, Retail Agency


T: +44 (0)1733 895 002

Green UK fades aseconomy hits the red - but it’s just a temporary blip

There has been much news coverage recently highlighting how sustainability issues are dropping down the corporate agenda as the recession deepens, however, according to a recent Lambert Smith Hampton survey, the stall is just a temporary blip.

LSH’s inaugural Corporate Real Estate

Matters research report maintains that

sustainability issues are still extremely

important to businesses and remain firmly

embedded within the long term agenda of

senior executives.

The report examines how businesses are

responding to the current economic climate

and the new challenges they are facing.

Survey respondents stated that large

corporate occupiers still recognise that

sustainable buildings boost productivity. As a

result 70 percent of those surveyed said they

would pay up to a 15 percent rental premium

for that benefit when they next move offices.

However, any such moves are now being

planned for the medium term.

Derek Jones, LSH Corporate Services, said:

“It is clear that the sustainability agenda is

being put on hold while businesses navigate

the deteriorating economy. But concern

for the environment is not forgotten and

sustainability will return to the fore once

economic conditions improve and the vice-like

pressure on business operations eases.”

Just over 67 percent of the survey’s

respondents believed that the current

economic and financial climate will lead to

companies postponing taking a sustainable

building in the short term. However, a

significant proportion said it was very likely

that they would take a sustainable building

when they next moved.

Other findings include:

35 percent would pay up to 5 percent •

more in rent in order to occupy a

sustainable building, while a further

35 percent would pay up to 15

percent more.

Sustainable buildings, providing better •

working environments, were considered

important by survey respondents.

71 percent rated environmental

improvements such as air quality,

lighting and noise reduction as improving

productivity.

For occupiers, the most important •

factor in a sustainable/BREEAM

excellent rated building was considered

to be energy efficiency and impact on

local environment.

81 percent of respondents thought •

environmental policy and CSR was

still important or very important to

their organisation.

According to the research, occupier fit outs

can have an impact on the efficiency of the

overall building, and managers and owners

therefore need to work closely with tenants to

help deliver sustainable fit outs.

Derek said: “In this rapidly changing world,

occupiers are focusing on how their buildings

can contribute to productivity. A recent RICS

report claimed that an increase of just 1

percent in employee productivity could nearly

offset a company’s entire annual energy bill.

“Sustainable buildings are viewed as a key

way of enhancing productivity performance

and therefore ultimately, a commercial

building that is not sustainable is likely to be

less attractive to tenants and less profitable for

its developer as a result.”

For further information, please contact:



T: +44 (0)20 7198 2250

Derek Jones, Corporate Services


T: +44 (0)20 7198 2360

Martin Treacy, Building Consultancy


T: +44 (0)20 7198 2140

Robin Mitchell, Lease Advisory


T: +44 (0)20 7198 2180

Visit www.lsh.co.uk to access our latest

market research.

Agenda / Issue Three / Q1 2009 / National Research


The Government’s Pre Budget Report (PBR) and its promise of a £3 billion fiscal stimulus to the UK economy is to be welcomed. However, as Sandy Townsend reports, a round-up of LSH’s quarterly national research demonstrates that the PBR’s rescue measures face stark opposition from the deteriorating economic conditions.

Recession inevitable Deflation looms for 2009

LSH’s Weather Map: Prospects for Property report reveals that although the next two years will undoubtedly be stormy, the outlook is improving for 2011.

According to the report, the property

market and broader economy

will surpass the depths of decline

experienced in the 1970s recession by 4.4

percent in 2009/2010. But, analysis of the

past 40 years highlights that both are cyclical,

maintaining a seven year bell curve.

Growth will return in 2011 but at more

incremental levels than previous downturns.

LSH predicts that markets will recover to long

term growth averages by 2013.

Headline rents at present are holding or just

slipping across all three major sectors but

incentives, such as rent free periods, are

moving out considerably.

Lack of demand from the financial sector has

hit the office sector hard, with suffering set to

continue in the short term before returning to

growth in 2011. Ezra Nahome, LSH Head of

Capital Markets, predicts a fall in office rents

of 14 percent in 2009 and 8 percent in 2010

before starting to recover in 2011.

The retail market’s outlook remains

dependent on consumer confidence and

response to interest rate cuts. In the short

term we can expect consumer spending

to remain subdued but the beginnings of

improvement in 2010, coupled with lower

interest rates mean that the retail sector will

be the first to see an upturn.

Empty property rates continue to negatively

impact on property portfolios in the industrial

sector, coinciding badly with falling demand

and increased operating costs. Despite this,

prime headline rents have largely remained

steady. However, there is increasing evidence

that rental values are beginning to soften in

some locations.

For further information on specific

sectors, please contact:

Ezra Nahome, Investment


T: +44 (0)20 7198 2222



T: +44 (0)20 7198 2250

Steve Williams, Industrial Agency


T: +44 (0)20 7198 2000

Julian Welch, Retail Agency


T: +44 (0)1733 895 002

Third year lucky for seven year itch

The question for the UK economy is not

if it will enter recession but how deep

and for how long it will last, states LSH’s

Economic and Property Market Bulletin.

According to the report, deflation will be

a key concern for 2009 as the economy

attempts to stave off a profound recession,

after it contracted by 0.5 percent in the third

quarter of 2008.

Ezra Nahome, LSH Head of Capital Markets,

said: “The change in the UK economic outlook

since August has significantly deteriorated

post Lehmans, and despite Government

intervention to the banking sector and the

lowering of interest rates, there is still a lack of

credit in the market. 2009 will inevitably see a

significant rise in business failures.”

The Consumer Price Index is expected to fall

to as low as 1 percent in 2010, significantly

undershooting the Bank of England’s target

rate of 2 percent.

In commercial property all three sectors, office,

industrial and retail were under pressure,

experiencing falls in rental values and a shift

out in investment yields.

The property market has now entered a

second phase of repricing driven by the weaker

outlook for the occupier market and economy.

Visit www.lsh.co.uk to access the latest

market research from LSH.

Agenda / Issue Three / Q1 2009 / National Research


Woolworths: victims of the credit crunch, or simply weak retailing?

Julian Welch, LSH Retail, considers whether the demise of one of the high street’s most established household names is really a result of the credit crunch or whether it was a foregone conclusion. Well there you have it.

Woolworths, one of the

nations most recognisable and

established brands has finally hit the buffers.

Ninety-nine years after opening its first store

in 1909, the company with a chain of 815

stores and 30,000 employees could struggle

on no more. Bearing the weight of more

than £325 million of debt, having had its

trade credit insurance withdrawn and being

forced to pay cash for its stock took its toll.

The great British public who fondly

remember the ‘Pick and Mix’ counter, the

happy staff and the good value are calling it

a ‘crying shame’, but in reality, is this actually

the case?

In an increasingly competitive market, it

can be argued that Woolworths simply

lost touch. Its brand identity weakened in

comparison to new entrants to the market

with better store designs, more appealing

Agenda / Issue Three / Q1 2009 / Retail


retailing environments, and more enticing

product lines. Following disposal of the

Woolworths brand by Kingfisher in 2001,

Woolworths tried many new initiatives,

looking at large store formats with Big W,

small store formats with Woolworths Local,

re-vamping signage, even trying the comedy

route with a fluffy sheep and sheepdog in TV

adverts that were almost trying to be akin to

the famous PG Tips ‘monkey’ but never quite

getting there.

So is Woolworths a victim of the credit

crunch? Well, undoubtedly the current

economic crisis has not helped matters,

but it can be argued that the chain’s failure

would have occurred even in the absence

of a faltering economy. The retailing arm

has been loss making for several years, the

company was propped up by 2Entertain,its

joint venture DVD business with the BBC,

and EUK, its DVD distribution business.

These two subsidiaries may well be sold off

separately as part of the fallout.

The fact that Woolworths was operating on a business model that relied upon a very tight cashflow margin simply spelled disaster.

As soon as the availability of credit tightened,

and in Woolworths’ case disappeared

altogether once its trade credit insurance was

withdrawn, the consequences were inevitable.

It is clear that consumers are taking flight

to value. Value retailers are reporting strong

sales growth: Primark up 18 percent for

the 16 weeks to 3 January; Aldi reportedly

up circa 20 percent on the previous year;

Poundland reporting 24.3 percent growth

in like-for-like sales for the 5 weeks to 4

January and Peacocks up 22 percent for the

same period.

Consumers, quite simply, are tightening their belts and looking for value for money.

Big ticket retailers are suffering most, with

DSGi reporting a significant loss of £29.8

million (compared with a profit of £52.4

million for the same period last year), and

a further 10 percent fall in sales during the

three months to January. MFI has sunk into

administration and closed 26 stores with

immediate effect. SCS and Land of Leather

are entering administration and Homebase is

showing a reduction of 10.2 percent in like-

for-like sales for the 18 weeks to 3 January.

So what will the fallout be and how will it

affect the high street? All Woolworths’ stores

are now closed, with (at the time of writing)

only 51 being saved under a package deal

with Iceland. There will therefore be a very

large number of stores sitting empty for the

foreseeable future.

Woolworths has traditionally been a footfall

generator for the high street. It is, or perhaps

was, seen as an ‘anchor’ tenant, one whose

presence signified prime or edge of prime

locations on suburban and urban parades.

The usual configuration of its stores, with

wide and imposing frontages, will mean that

there may well be significant gaps appearing

on high streets across the country.

The lack of this footfall generator is likely

to have a marked effect on surrounding

retailers, directly affecting their business.

Due to the size of many of the stores, they

will be difficult to split up into smaller units.

Landlords of Woolworths stores will be

frantically searching for options to redevelop

sites in the face of a very tough property

market with little demand.

Was Woolworths a victim of the credit crunch?

Possibly. Victim of a failing business model and

weakening brand? Almost certainly.


Julian Welch, Retail


T: +44 (0)1733 895 002

Agenda / Issue Three / Q1 2009 / Retail


The Manchester office market remained

resilient to the economic downturn

throughout 2008. The completion and

delivery of a number of high quality schemes

saw take up of Grade A office space in

Manchester city centre rise to over 40 percent

of all transactions taking place in the first

three quarters of the year, compared with 23

percent in 2007.

The South Manchester market saw improved

levels of activity compared to 2007, with

smaller transactions driving activity.

In the next 12 months Manchester will see

a number of new schemes coming onto the

market, including MCR Property’s 9 Portland

Street, United Utilities’ Linley House and

Magnus Property’s 19 Spring Gardens.

Prime rents for Grade A space currently stand

at £28.50 per sq ft and predictions for 2009

remain the same, albeit there is likely to be

strong competition for lettings and occupiers

will be in an enviable position to secure

favorable terms.


Peter Skelton, Head of Manchester


T: +44 (0)161 228 6411 Research round-up

Manchester

Birmingham

LSH’s national research reports provide analysis of the commercial property industry across our national network of 28 offices.

Total office take-up in Birmingham

city centre has remained reasonably

constant in recent years, averaging circa

600,000 sq ft per annum. Despite widespread

economic challenges, 2007 proved more

fruitful with around 660,000 sq ft and 2008

proved exceptional with 831,290 sq ft take-up

January to September.

Record take-up figures were driven by the

supply of high quality product, largely lacking

from the market in recent years. Colmore

Plaza brought 310,000 sq ft to the market,

with new Grade A buildings, One Snowhill, 45

Church Street and 11 Brindley Place, bringing

a further 354,296 sq ft in early 2009.

Birmingham city centre has a vacancy rate of

8 percent, 40 percent of which is classified

as Grade A space available for immediate

occupation. Transactions involving Grade A

space accounted for 46 percent of take-up

to October 2008 (compared to 32 percent in

2007). Prime rental levels moved to £33 per

sq ft, the highest this year.


Terry Corns, Head of Birmingham


T: +44 (0)121 236 2066

Visit www.lsh.co.uk to access our latest market research.

Agenda / Issue Three / Q1 2009 / National Research Round-up


Northamptonshire and Rugby

Leeds

North East

Northampton was identified as one of

the best office locations in the UK by

LSH research in 2008, due to its low

labour costs and the availability of good-

quality space at competitive prices.

In 2007, the Northampton office market

witnessed strong activity, although demand

slowed towards the end of the year. Take-up

was 200,970 sq ft but the majority of demand

was for space of sub 10,000 sq ft. Take-up in

2008 is expected to be down on the previous

12 months, partly as a result of reduced

demand, but also reduced levels of stock.

Meanwhile, lack of funding in capital markets

and the contentious empty business rates

liability led to less speculative industrial

development, driving down land values.


Ian Leather, Head of Northampton


T: +44 (0)1604 662550

Total office take-up in Newcastle city

centre remained strong the first nine

months of 2008, with 420,901 sq ft of

transactions, including the largest pre-let in

the city’s history when Newcastle University

Business School agreed to take 110,000 sq ft

at Downing Plaza.

Prime rental levels are in the region of £22

to £24 per sq ft with Wellbar Central and

Coopers Studio both quoting £24 per sq ft.

While these headline rental levels are likely

to remain, an increase in flexible terms and

incentives is expected as landlords become

more deal focused.

Industrial take-up in the North East has fallen

below previous figures, with reduced levels

of enquiries and transactions. Total supply

currently stands at 14.1 million sq ft, of which

23 percent is new or refurbished. Prime

industrial rents are in the region of £5.00 to

£5.50 with Team Valley attracting the highest

rents for Grade A industrial space at £6.00

per sq ft.


Darron Barker, Head of Newcastle


T: +44 (0)191 261 1300 Total office take-up in Leeds city centre

for 2008 fell below the level achieved in

2007, with 333,755 sq ft of transac-

tions recorded during the first three quarters

of the year.

While total take-up in 2008 lower than the

592,639 sq ft transacted during 2007, the

deficit will not be substantial. Larger transac-

tions to date include the 37,000 sq ft let to

Irwin Mitchell and 22,900 sq ft to Skipton

Building Society. Although, the majority of

deals concluded have been within the sub

5,000 sq ft market.

Due to its inability to accommodate larger

buildings, developers and, subsequently,

occupiers are now favoring the south and

west of Leeds city station over the traditional

office core where the majority of new office

buildings have been built, joining the likes of

ASDA, Eversheds and Grant Thornton.


Richard Wackett, Head of Leeds


T: +44 (0)113 245 9393

Glasgow

Take-up in Glasgow city centre during

2008 is likely to be 300,000 sq ft,

compared to a ten-year average of

500,000 sq ft, the slowdown in demand due

to the decline in the business and financial

services sectors.

Market activity has been limited to a

large degree by a lack of Grade A supply.

Meanwhile, speculative schemes scheduled

to reach the market during 2009 are likely to

be well received given pent-up demand for

Grade A accommodation.

The current economic difficulties are likely

to inhibit further speculative development,

resulting in a return to an undersupply of

high-quality space just as the economy begins

to recover.

A new prime rental high of £28.50 per sq ft

was achieved during the year, with £30 per sq

ft likely to be reached during 2009.


David Smith, Head of Scotland


T: +44 (0)141 226 6777

Agenda / Issue Three / Q1 2009 / National Research Round-up


All in aThe last three months have seen LSH

building surveyors being transported

by speedboat and helicopter, through

stormy seas and precarious conditions

to inspect various lighthouses along the

coastline including The Needles, Hurst

Point and Anvil Point. Tom Everington, LSH

Building Consultancy, on his return from

surveying Eddystone Lighthouse, famous for

its appearance on BBC’s television adverts,

joked: “Nothing’s impossible – we can survey

anything anywhere.”

“When LSH was awarded the Trinity House

contract, I knew it would be an exciting

opportunity to survey buildings that are

highly unusual and demonstrate our skill and

professionalism no matter where the building

is located.

“However, the fear really set in when I was

standing in my flight suit about to board

the helicopter that was to transport us to

Eddystone which is built on a very small rock

11km out to sea. We were set down on an

unbelievably small helipad on the top of the

lighthouse in a fairly stiff breeze with the waves

crashing onto the rocks below – a metre off

target either side and we would have been in

serious trouble!

“The lighthouses were incredible; I was amazed at the detail that had gone into their planning and design. Everything is built with a curve to match the inside of the circular tower.

Even the cupboard doors are curved. They

are generally in beautiful condition bearing

in mind the harsh conditions which they

operate”, said Tom.

Trinity House is the official Lighthouse

Authority for England and Wales. It is

responsible for the provision and maintenance

of navigational aids such as lighthouses, light

vessels, buoys and maritime radio/satellite

communication systems.

Trinity House has three main functions:

The care of all lighthouses in England •

and Wales

Providing aids to navigation•

Serving as a charitable organisation •

for mariners

Trinity House maintains 71 lighthouses

ranging from isolated rock towers like

the Eddystone to mainland towers like

Southwold lighthouse.

For more information, please contact:

Kevin Argent, Building Consultancy


T: +44 (0)207 198 2138

Paul Lidgley, Valuation


T: +44 (0)207 198 2183

Every once in a while an opportunity presents itself to cast your fears aside and rise to the challenge. Rarely does this happen between the hours of nine to five. However, LSH’s building surveyors recently had the daunting task of conducting valuation and condition surveys on 15 lighthouses along the choppy English coastline for Trinity House.

day’s workA day in the life of an LSH Building Surveyor

Agenda / Issue Three / Q1 2009 / Trinity House


The last three months have seen LSH

building surveyors being transported

by speedboat and helicopter, through

stormy seas and precarious conditions

to inspect various lighthouses along the

coastline including The Needles, Hurst

Point and Anvil Point. Tom Everington, LSH

Building Consultancy, on his return from

surveying Eddystone Lighthouse, famous for

its appearance on BBC’s television adverts,

joked: “Nothing’s impossible – we can survey

anything anywhere.”

“When LSH was awarded the Trinity House

contract, I knew it would be an exciting

opportunity to survey buildings that are

highly unusual and demonstrate our skill and

professionalism no matter where the building

is located.

“However, the fear really set in when I was

standing in my flight suit about to board

the helicopter that was to transport us to

Eddystone which is built on a very small rock

11km out to sea. We were set down on an

unbelievably small helipad on the top of the

lighthouse in a fairly stiff breeze with the waves

crashing onto the rocks below – a metre off

target either side and we would have been in

serious trouble!

“The lighthouses were incredible; I was amazed at the detail that had gone into their planning and design. Everything is built with a curve to match the inside of the circular tower.

Even the cupboard doors are curved. They

are generally in beautiful condition bearing

in mind the harsh conditions which they

operate”, said Tom.

Trinity House is the official Lighthouse

Authority for England and Wales. It is

responsible for the provision and maintenance

of navigational aids such as lighthouses, light

vessels, buoys and maritime radio/satellite

communication systems.

Trinity House has three main functions:

The care of all lighthouses in England •

and Wales

Providing aids to navigation•

Serving as a charitable organisation •

for mariners

Trinity House maintains 71 lighthouses

ranging from isolated rock towers like

the Eddystone to mainland towers like

Southwold lighthouse.

For more information, please contact:

Kevin Argent, Building Consultancy


T: +44 (0)207 198 2138

Paul Lidgley, Valuation


T: +44 (0)207 198 2183

Pictured: The Needles is a row of chalk

formations rising off the Isle of Wight. The

lighthouse has stood at the western end of

the formation since 1859.

Agenda / Issue Three / Q1 2009 / Trinity House


In recent years substantial pressure has

been put on the Government to review

the way in which it makes effective use

of its workplaces. ‘The Lyons Review of

Public Sector Relocation (March 2004)’,

commissioned by The Chancellor of the

Exchequer and written by Sir Michael Lyons,

examined the possibility of departments

relocating 20,000 civil service jobs from

London. This review, along with Sir Peter

Gershon’s review of public sector efficiency,

has had a dramatic affect on property

management strategies for Government

departments and how they can effectively use

both existing and future workspace.

Hindered partly by the difficultly to reconfigure

its existing historic buildings, the Government

initially reacted slower than the private sector

to trends which were encouraging openness,

a less rigid hierarchy and a more flexible use

of space in their workplaces. The relocation

of departments into the regions has opened

up opportunities to occupy more modern

workplaces and a shift of responsibility to

individual departments to address their

workplaces has accelerated the pace of

change.

In addition to this, LSH’s Corporate Real

Estate Matters research report highlights

that the credit crunch has made cost-cutting

and better use of resources, both capital

and human, critical. Accommodation can

arguably be an obvious choice as it is the

second highest cost to the business after

staff. Furthermore, it represents a cost that is

identifiable and measurable. For a significant

proportion of companies property has

traditionally been an operational rather than

a strategic issue. However, there is increasing

evidence that property is moving up the

business agenda and becoming a strategic

resource issue, as pressures for delivering

strategic objectives, improving output and

reducing costs intensify.

Creating sustainable workplaces

Creating sustainable workplaces is high on

the Government’s Sustainable Development

Strategy agenda with key focuses on

minimising waste and energy consumption

and promoting renewable energy processes.

The climate change bill, launched by the

Government in 2007, set a two stage target

to reduce the total UK’s carbon emissions,

the first target of 20 per cent reduction by

2010, and then a second target of 60 per cent

by 2050 which will incorporate the building

fabric, finishes and furnishings as well as

structural, mechanical and electrical issues.

The Government has set strict guidelines

and targets for its various departments and

agencies to adhere to. They will be asked

to evaluate and report on their specific

contribution to these targets, including

assessing planned construction activity and

how suppliers are addressing sustainability.

With the likes of BREEAM, the most

commonly used means of reviewing the

environmental performance of buildings, and

Evolution of the modern workplace

With Chancellor Darling’s recent plans to increase public sector efficiency with the aim of saving over £30 billion, Martin Treacy, LSH Building Consultancy, looks at how the Government has responded by reviewing its efficiency, sustainability and workplace culture.

The Government raises the bar

Agenda / Issue Three / Q1 2009 / Evolution of the Modern Workplace


Part L of the building regulations demanding

greater improvements in energy efficiency,

developers must now build to the highest

levels in order to achieve the ever looming

carbon-zero building targets.

Energy Performance Certificates which came

into effect in April are providing invaluable

guidance to occupiers and developers seeking

sustainable and energy efficient buildings.

Arezou Said, LSH Research, said: “Industry

has warmed up to the sustainable building

agenda, not because of an urge to save the

planet but because it has begun to see the

benefits that these properties offer higher-

quality spaces and lower operating expenses.”

Creating flexible working environments

As the Government reassesses its workplaces,

it is seeking increased openness and

communication, breaking down departmental

barriers and encouraging a more flexible

working environment. Advances in technology

have transformed the way the Government

works, from the advent of the internet,

to state of the art electronic data storage

replacing physical archiving and paperwork.

The impact is ultimately a more effective use

of workspace.

Governments have begun to merge many of

their central services such as accounts, human

resources and procurement. A successful

example of this was carried out in 2006 by

Her Majesty’s Prison Service in Newport, South

Wales, which combined offices and staff in

the region to improve efficiency and delivery

of services.

Creating the right image

Government departments are realising that

the exterior of their buildings, seen as dull

and unfriendly in the past, have reflected a

negative image on the services they provide to

the public. Ultimately a workplace which looks

right, is in the best location, is sustainable and

offers a better working environment is going

to encourage improved productivity and a

more innovative and progressive service. It

also provides an environment more likely to

motivate staff into working harder and more

effectively and attract a high calibre workforce

in the future.

A team effort

In today’s Government, values such as

openness and accountability, and issues

encompassing accessibility and corporate

social responsibility, are all top of its agenda.

As part of the drive to achieve these values,

the Government will not only be assessing

its own working practices but those of its

suppliers. Developers need to realise that they

too need to get in line with these core values

and work together with the Government to

achieve its targets.

The establishment of the UK Green Building

Council has gone a long way towards

improving the sustainability of the built

environment, by transforming the way it is

planned, designed, constructed, maintained

and operated.

Government departments are annually

reviewing their spend on construction and

building assets to deliver improved efficiency

and value for money. Developers and

construction firms need to offer ways to

help achieve these targets when designing

new workspaces or making effective use of

existing workspaces.

As the above demonstrates, the Government is

the new catalyst for change. Now developers,

property professionals, designers and the

construction industry must work with the

Government to roll out the same ethos and

approach across the public and private sector.


Martin Treacy, Building Consultancy


T: +44 (0)20 7198 2000

Agenda / Issue One / City Spotlight Agenda / Issue Three / Q1 2009 / Evolution of the Modern Workplace


Slowing tenant cash flows spell tricky times ahead for landlords and owners

In this challenging economic climate,

extracting timely rent payments on behalf

of clients is increasingly important. Figures

collected by Lambert Smith Hampton (LSH)

suggest that, despite worst fears, tenants are

still managing to meet their rental obligations

within an acceptable time limit to their

landlords.

This does not appear to be constrained to

any particular industry and LSH is managing

successful rent collections right across the

industrial, retail, and office sector.

What does the future hold?

Unfortunately, due to an increasing number

of businesses heading into administration or

receivership, it is predicted that the worst is

yet to come.

LSH’s Corporate Real Estate Matters research

report highlights that businesses are putting

accommodation second only to staff as

measurable cost and therefore a key area in

which significant cost savings can be made.

Shorter leases have increased in popularity

and 25 percent of companies surveyed

intended to consolidate their operations by

relocating into one building.

As the current economic uncertainty deepens,

it is feared that many tenants may not have

the financial means to pay their rent, and the

ones who do, may become scared of letting

go of their cash, especially in large quarterly

amounts. Non-payment of rent is increasingly

hitting the headlines and the repercussions

associated with delays in receiving payments

are potentially disastrous.

More and more tenants are finding paying

monthly is a more manageable option. LSH

is reporting an increase in the number of

tenants contacting us to see if their landlord

will accept the next quarter payment on a

monthly basis, with this continuing right

through 2009.

Landlords faced with tenants defaulting on

rental payments are obviously keen to retain

their tenant to guarantee a steady flow of

income as opposed to having an empty

property and a liability for empty property

rates. Chancellor Darling’s Pre Budget Report

outlined extended relief on empty rates for

commercial properties with the rateable

value of £15,000 or under will do very little

to ease the pressure for the majority of

landlords and owners should their tenants

vacate their properties.

A tenant asking to pay rent monthly is an indication that they are anticipating financial difficulties, and therefore, the landlord has no guarantee that rent for the full quarter will be collected.

Alan Christie, LSH Property Management,

said: “In times of economic hardship, many

tenants will seek to delay rental payments for

as long as possible, believing that the money

is better in their account earning interest

than in our client’s.

“Until we have a better idea of what is

in store over the next 12 months for the

economy and business markets, we will

continue to adjust and adapt to an ever

changing landlord and tenant market.”


Alan Christie, Property Management


T: +44 (0)115 950 1414

Agenda / Issue Three / Q1 2009 / Cash Flows and Woes


&Cash fl ows&Cash fl ows&&In times of economic hardship, many tenants may seek to delay rental payments

for as long as possible, believing that the money is better in their account earning interest than in their landlord’s.

Alan ChristieProperty Management Lambert Smith Hampton

woesAgenda / Issue Three / Q1 2009 / Cash Flows and Woes


Modern GlasgowFlourishing in a new era

Glasgow is attractive to domestic

and inward investors alike and its

diversified economy makes it well

placed to weather the ongoing economic

storm. Financial services giants such as JP

Morgan, Morgan Stanley, Barclays and BNP

Paribas have invested in the city, and a boom

in the creative industries has been exemplified

in the creation of the Digital Media Quarter in

what is believed to be among Europe’s most

sophisticated broadcasting facilities.

Alongside the glass and steel of new office

blocks, there is an equal focus on residential,

commercial, leisure and educational facilities

bringing new life and a new buzz to the

city. These credentials will be enhanced even

further following the recent announcement

of plans by Jumeirah, the Dubai-based luxury

hotel group, to operate a new five-star super

deluxe hotel in the city.

A major highlight of Glasgow for visitors

and locals alike is the outstanding quality of

its retail offerings. Led by Buchanan Street,

Glasgow is ranked an amazing second behind

London’s West End in the annual retail vitality

index, regularly attracting new openings by

international retailers.

Cementing its growing reputation as a first

class destination for visitors; the city was

recently named as one of the top 10 cities in

the world by Lonely Planet, a leading travel

guide, which described it as ‘a fun, stylish city’.

There is much still to be achieved, and

investment in Glasgow is continuing with

the successful bid for the Commonwealth

Games in 2014, sparking further

infrastructure improvements.

David Smith, Head of Glasgow office, said:

“Lambert Smith Hampton’s 25 year presence

in Glasgow reflects the city’s reinvention. A

bedrock of consultancy services including

valuation, building consultancy and property

management, has expanded into full

transactional services, including investment,

development and office agency. This breadth

of expertise has allowed the company to

expand its presence and provide best advice in

all market conditions.

“Glasgow and LSH’s biggest asset is

undoubtedly its people who have a naturally

positive outlook and brashness that, along

with their football teams, make them

recognisable the world over. The city and LSH

remains confident in its future.”


David Smith, Head of Glasgow


T: +44 (0)141 226 6777

Glasgow, once known as the Second City of the Empire, was made famous across the world for its shipbuilding, and at the height of its powers was a flourishing trading centre between the Caribbean, Europe and the Far East. This brought wealth and an international outlook and the city owes much of its architectural heritage to this time. The decline in these industries brought a grim reputation but today it is a city transformed by new modern industries and a growing, confident population.

Investment in the city is

continuing with the successful bid for the Commonwealth Games in 2014, sparking further infrastructure improvements.

David SmithHead of GlasgowLambert Smith Hampton

Visit www.lsh.co.uk to access the latest

LSH Glasgow market report.

Agenda / Issue Three / Q1 2009 / City Spotlight


Glasgow: the facts

Glasgow is Scotland’s largest urban

economy, generating over £13 billion

Gross Value Added each year.

One of the UK’s fastest growing cities:

over the past decade the number of jobs

has grown to more than 400,000: an

increase of more than 60,000.

Almost 2.2 million people live within a

45-minute drive of the city centre, thanks

to the high-quality nature of the road

network. The result is that Glasgow has

an extensive employment catchment

area, more highly skilled than many of

those in Britain’s other key cities.

Census evidence now suggests that the

population of Glasgow is more highly

qualified than Great Britain’s population

as a whole.

The repositioning of Glasgow has been

widely attributed to the competitive

advantages it holds in terms of the

availability of high-quality, available

staff, particularly in the 20-29 year-old

category, and its high percentage of

graduate residents.

Pictured: Looking to the roof in

Glasgow’s Botanic Gardens, known

internationally for its impressive glass

houses and extensive tropical and

temperate plant collections from around

the world.

Agenda / Issue Three / Q1 2009 / City Spotlight


The Comprehensive Area Assessment

(CAA) will replace the Comprehensive

Perfomance Assessment (CPA) from

April 2009 and will focus on how well

councils and local partners such as police,

fire, health and care services deliver better

outcomes in improving the quality of life for

local communities.

LSH recently conducted a survey of councils

across the UK to enquire how councils

perceive the CAA and whether they believed

property and strategic asset management

could play a key role in helping them achieve

a good assessment. The overwhelming answer

was ‘yes’!

Encouragingly, the survey highlighted that

the way property is perceived within local

government is changing. Its profile is rising

and 63 percent of our survey group believed

that property could provide significant

opportunity in helping them meet their

strategic objectives.

CAA should also lead to and facilitate more

sharing of accommodation (both back-office

and public-facing) with local partners, third

party organisations and even the private

sector. This may extend to the increased

utilisation of accommodation through the

day and evenings for a variety of uses. There

will also be a greater need for flexibility in

workspace design and working practices.

Undoubtedly, meeting the requirements

of CAA will require a revised approach to

property asset management to ensure that

the use of public sector assets are maximised

to enhance service performance through

potential rationalisation, consolidation and

lease management as well as unlocking latent

value from property declared unfit for purpose

and surplus to requirements.

As a national provider of property advisory

services to the public and private sectors

LSH has a proven capability in helping clients

achieve their strategic objectives.

LSH will be hosting a series of seminars over

the coming months to discuss the survey’s

findings and work with organisations to

successfully address the requirements of CAA.

To find out more about the survey please

contact, please contact :

Ian Howarth, National Business


T: +44 (0)207 198 2050

Times are changingWith the Government’s continued drive to improve efficiency, enhance service delivery and achieve cost savings within the public sector, April 2009 heralds the introduction of a new performance assessment for local government and its strategic partners.

Agenda / Issue Three / Q1 2009 / Public Sector


As Lambert Smith Hampton (LSH) enters its 236th year, surveying’s fifth oldest firm looks back on its long history to draw on lessons learnt as it commences 2009 facing a deep recession, the likes not seen for 80 years.

Founded in 1773 by Robert Herring in

its earliest incarnation, LSH posted its

first sale on 1 April that year, which

was published in the London Daily Advertiser.

By 1852, the firm was describing itself

as auctioneers, estate agents, surveyors,

upholsterers and decorators.

LSH has since weathered many economic and

political storms. The firm has grown through

a history of mergers and acquisitions. Its

constituent parts have been known under

many different guises, including; Herring

Baker Harris, Connell Wilson, Lambert Smith

& Partners, Anthony Brown Stewart and

Hampton & Sons.

Ironically, when looking through the rear view

mirror, LSH experienced its largest periods of

growth through M&A during the 1970s and

1990s recessions. The firm’s business model

of consultancy strength, domestic focus and

geographical spread bode well in times of

economic difficulty, when the transactional

markets dipped.

After completing a management buy-out

from then owners WS Atkins in June 2007,

LSH is planning on history repeating itself;

responsibly managing existing operational

costs to support cash flow in order to deliver

investment in key growth areas of its national

service lines.

With a business spanning four centuries of operation, 2009 will still no doubt hold its challenges but LSH has a wealth of experience and success to draw on and emerge stronger and more client focused than ever before.

MBE Honours

Congratulations to long term LSH employee,

Charles Partridge, on the honour of receiving

an MBE in the 2009 New Year Honours List

for service to the surveying industry.

Charles, LSH Rating, has worked for

the firm for over 40 years – a sixth of its

history! Reflecting on his time at the firm,

Charles commented: “Little did I realise

when I walked through the front door of

23 St James Square to join Herring Daw &

Manners on 1 September 1970 that nearly

40 years later it would have evolved from a

business with 60 staff in three offices to one

employing nearly 1,000 people in 28 offices

across the UK and Ireland.

“The calculator had not made its presence

felt in surveyors’ offices, we would not see

a computer for another 10 years and I was

warned that brown shoes were only worn by

West End surveyors on a Saturday!”

How times have changed.

Pictured: VE Day 1945. The site of Herring

Son & Daw’s City office, ‘vacated’ during an

air raid in 1941.

Agenda / Issue Three / Q1 2009 / LSH: The History


History repeats. We’re planning on it!

The extraordinary success of Team GB in the Beijing Olympics transformed the nation’s expectations for the British athletes lined up for London 2012. The sacrifice our sporting heroes make is great, considering their relatively short careers and the lurking demon of injury which could finish a career at any time.

The growing concern of ‘what’s next?’ is

an issue very close to the heart of Guy

Gregory, LSH Commercial Director, who

played top level rugby for London Wasps for

many years.

Guy said: “There are advantages of making the

transition from sport to business if you consider

what makes a great athlete. Determination,

self-drive, goal orientation, team leadership;

none of these would look out of place on the

CV of a prospective employee.”

Marion Murphy, LSH National Business,

has been involved in rowing both as a cox

for men’s crews and a competitive rower

since school.

Marion explained: “Participating in a

competitive sport and pursuing a career

takes a bit of juggling; I would often have an

early morning outing on the River Thames at

6.30am, off the water by 8.00am and into

Oxford Street by 9.30am, at least three or four

days a week.”

James Brierley is the ex-Captain of the GB

Junior Athletics Team and now a successful

senior surveyor at LSH. He said: “I think

unlike being a doctor or a lawyer, there are a

multitude of jobs within the property industry

which suit different people. On the job training

and the day-to-day variance makes the job

interesting and fulfilling. It is an exciting

industry which respects and encourages

athletes and welcomes individual success.”

LSH is currently working with Sport2Business,

which is a career management company for

elite competitors. It provides a recruitment

channel helping retiring athletes address their

future welfare concerns.

Property and surveying are attractive areas

for sports people in particular as they focus

on team work and goal setting. Guy said:

“Relationship building is incredibly important

in the property industry, and sports people

can often bring with them good networks

of contacts from their professional playing

days, including team mates, opponents and

sponsors.”


Guy Gregory, Commercial Director


T: +44 (0)20 7198 2198

Bringing the winningdrive to business

Determination, self-drive, goal

orientation, team leadership; none of these would look out of place on the CV of a prospective employee.

Guy GregoryCommercial DirectorLambert Smith Hampton


Agenda / Issue Three / Q1 2009 / Sport2Business

250 Capability Green , Luton - One of the

country’s premier business park locations

For viewing and further information,

please contact:

Paul Jessop


T: +44 (0)1582 450444

Agenda / Issue Three / Q1 2009 / Feature Property


www.lsh.co.uk

BirminghamTel: +44 (0)121 236 2066

BristolTel: +44 (0)117 926 6666

CambridgeTel: +44 (0)1223 276336

CardiffTel: +44 (0)29 2049 0499

ChelmsfordTel: +44 (0)1245 215521

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

EdinburghTel: +44 (0)131 226 0333

FarehamTel: +44 (0)1489 579579

GlasgowTel: +44 (0)141 226 6777

GuildfordTel: +44 (0)1483 538181

LeedsTel: +44 (0)113 245 9393

LeicesterTel: +44 (0)116 255 2694

LondonTel: +44 (0)20 7198 2000

LutonTel: +44 (0)1582 450444

MaidenheadTel: +44 (0)1628 676001

ManchesterTel: +44 (0)161 228 6411

Milton KeynesTel: +44 (0)1908 604630

Newcastle upon TyneTel: +44 (0)191 261 1300

NorthamptonTel: +44 (0)1604 662550

NorthamptonBuilding ConsultancyTel: +44 (0)1604 664366

NottinghamTel: +44 (0)115 950 1414

OxfordTel: +44 (0)1865 200244

PeterboroughTel: +44 (0)1733 563921

ReadingTel: +44 (0)118 959 8855

St AlbansTel: +44 (0)1727 834234

SheffieldTel: +44 (0)114 275 3752

SouthamptonTel: +44 (0)23 8033 0041

SwanseaTel: +44 (0)1792 702800

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