Property Blog post by Steve Berrett, Agency Partner, Vail Williams.
There is no denying that is has been a tough few years for Crawley, which sits in the heart of the Gatwick Diamond region.
The town was hit hard by the pandemic and the closure of Gatwick Airport, but businesses in Crawley are coming back with a vengeance.
Over the past 12 months, our Gatwick agents have witnessed an office market revival in the town, with around 200,000 sq ft of office space leased up – the best office take-up since the 60,000 sq ft lows of 2021.
From businesses already based in Crawley relocating to new Grade A space, to inward investment into the town by those seeking to locate there, the number of office deals is significantly up on two years ago. This, combined with some of the older redundant office stock being sold for alternative uses, has heavily reduced the overall office supply.
But who has been active in the market and why are occupiers choosing Crawley as a place to locate their businesses? Gatwick Agency Partner, Steve Berrett, explores.
What deals have been done and where
Most of the office deals over the last year have been ‘out of town’, demonstrating that not all markets are driven by the pull of a city or town centre – albeit it does have an important role to play.
The larger deals have been few and far between, with Nestlé taking around 40,000 sq ft at Park House whilst remaining committed to their premises at City Place, and Dolby Vivisol securing 22,000 sq ft at Palladian in a move from Lowfield Heath. Finally, Bramble Energy acquired 34,000 sq ft at Atrium Court in Tilgate.
However, the majority of leases signed have been for smaller requirements between 1,500-5,000 sq ft, including Thales who took 5,000 sq ft of Grade B office space at Platinum House at £18.00 psf.
We have also seen companies relocate from smaller towns or hubs to reach the larger employment pool of Crawley, to benefit from the value for money and connectivity it has to offer.
Albion Rye Associates relocated from their serviced offices to take around 6,000 sq ft of office space at Explorer at £25.50 psf.
Meanwhile EVC Limited relocated to Crawley from Pulborough, expanding to take 9,000 sq ft of Grade A office space at Nexus, Gatwick Road, in a deal negotiated by our Gatwick commercial property agents.
At Manor Royal, the biggest business park in the Gatwick Diamond area, we have seen a lot of cross over between industrial and offices, with many of the deals this year for hybrid uses where occupiers have sought a mix of office, industrial and training space.
This was the case for TUI which moved from Lowfield Heath, downsizing from their 50,000 sq ft warehouse / office to move operations to Explorer 2 on Manor Royal where they have taken around 4,800 sq ft of refurbished Grade A office space at £27.50 sq ft.
Occupiers have also demanded better environmental credentials. Alongside this, Manor Royal BID (Business Improvement District) signed an agreement with leading energy consultancy firm Eden Utilities earlier this year to support tenants’ journey to Net Zero, as Steve Sawyer, Executive Director of Manor Royal BID, explains:
“Our aim over the next five years is to make the Manor Royal Business District a more sustainable place for businesses to locate to. Our partnership with Eden Utilities is one way we are doing that, alongside other initiatives such as our community owned energy company to support the transition to cheaper, renewable energy.”
Location, location, location
The geographic position of Crawley, close to both the M23 and M25, will always ensure that it is a strong competitor as a business destination, particularly for those companies requiring excellent transport connectivity – be it via rail, air or road.
Speaking of highways, the second phase of infrastructure works funded by the Crawley Growth Programme has just completed, delivering significant improvements at Manor Royal making it even more accessible for businesses and their workers.
Meanwhile, in the town centre, public sector investment in the public realm at Queens Square, Queensway and The Pavement has further enhanced Crawley, creating an attractive, vibrant and enjoyable space for businesses and their people to enjoy.
Together with the fact that Gatwick Airport has been fully operational for some time now, this has given businesses more confidence and certainty to plan for their future property needs.
They know how many people they have in the office, have a regular work patterns to work with and understand what they need from their office space, enabling them to progress with their future workplace requirements –with best-in-class Grade A quality and a hybrid way of working in mind.
And Crawley landlords are responding to this through investment in the refurbishment of their office assets, as Per Bertelsen, Director at Crawley-based ARLO Holdings Ltd, explains:
“Landlords like us have got to be increasingly creative and explore new angles for our office assets to attract occupiers in the current market – be that repurposing or refurbishing them, looking at splitting them up, or improving their energy efficiency. It is allowing us to think increasingly outside the traditional office box to lure occupiers in a competitive market.”
“There is always a challenge around the risk versus benefit of investing in assets and having the assurance that you will get it back in rental terms. But it helps to have property agents on the ground who know what occupiers want and can feed that back, giving landlords that confidence and insight to inform their decision-making.”
What’s hot in the Crawley office market
In the town centre, Crawley Borough Council’s Create Building, which secured its first tenant in June this year, is the only new office development.
It provides a range of floorplates from 7,000 - 77,000 sq ft. Situated in the town centre's Regeneration Quarter, it offers easy access to cafés, restaurants, gyms, and the green space of Memorial Gardens, as well as impressive ESG credentials, targeting BREEAM Excellent and with an EPC Rating of B.
There is just one remaining Grade A office available at Explorer 2 in Crawley which we are marketing on behalf of abrdn.
The 1,500 sq ft first-floor offices on Flemming Way are available to let following a comprehensive refurbishment programme by the landlord, who speculatively invested in upgrading both the office floor space as well as communal reception and WCs.
Gordon McGregor, Asset Manager at abrdn explains: “Businesses want to ensure that their staff are motivated to work from the office, which is why in the case of Explorer it was worth us speculatively investing in the building and improving the common parts. By reinvesting in building not only does it deliver a quality product to the market and improve communal areas but it helps reduce our rental voids.”
Our Gatwick agents are also marketing Nexus - a 60,000 sq ft Grade A headquarters office building with a BREEAM rating of ‘Very Good’, which has a second floor and part of the third floor available to let. The building fronts Gatwick Road in the heart of Manor Royal Business District and is situated in a prime position on a mixed-use commercial development.
If you are looking for flexible, serviced office space, Southpoint offers an affordable, refurbished option for businesses not wanting to commit to a more traditional lease.
Further out of town is Northwood Park where there are a variety of office rental opportunities, as well as the chance to repurpose offices for alternative uses. We currently have 19,000 sq ft under offer here to a new gym and 7,000 sq ft under off to a specialist medical clinic.
What can you expect to pay?
You can lease Grade B space for as little as £15.00 - £20.00 psf, but there are fewer occupiers interested in that quality of space at the moment.
Typical refurbished Grade A rates in Crawley are reaching between £27.00 - 28.00 psf, which is good value when compared to other towns around the M25 southern ring.
However, headline rents for new prime offices are starting to exceed £30.00 psf, and it will be interesting to see the Council's Create building achieve this benchmark.
Likewise Royal London’s recently completed refurbishment of c.30,000 sq ft at 2 City Place Gatwick will seek to achieve >£30.00 psf.
What does the future hold?
The of level of take-up this year, combined with some outdated offices being let or sold for alternative uses, has helped reduce the oversupply of offices we saw in 2022 which saw some 500,000 sq ft of space flood the market.
Today, we are seeing a more suitable level of availability at around 160,000 sq ft of Grade A or new stock both in the town centre and out of town, and aside from Create Building, there hasn’t been any new speculative office builds in Crawley.
Together with larger offices such as Churchill Court and the various ex-Virgin buildings being repositioned for major logistics development, there is potential in 2024 for the remaining office supply to be snapped up if current take-up trends continue.
This represents an opportunity for landlords with ageing assets to invest in refurbishment programmes to attract quality occupiers seeking high-specification offices.
However, they will need to remain ‘footloose’ as prime rents have not increased significantly. This makes refurbishment of older Grade B or Grade C stock a harder pill to swallow, so being able to adapt or break up space to meet occupier needs, or be creative with it by exploring other uses, will be important this year.
For help and support with your office or industrial needs in Crawley or the wider Gatwick region - whether you are an occupier, landlord, investor or developer - Vail Williams can help.
Date Published: 29/02/2024