Worcester: capital city of mainstream

If you want to know what Middle England thinks, go to Worcester. The cathedral city on the river Severn has long been a bellwether for relatively affluent, relatively conservative England. Tony Blair courted “Worcester woman” in his 1997 landslide, and 20 years later Worcester remains the ideal place to take the national temperature. So the opening later this month of a new £20m shopping centre makes Worcester a great place to test the prospects for the 4.2m sq ft of UK shopping centre space now under construction at a time, according to Cushman & Wakefield, when retail spending is under pressure and inflation is rising. Worcester is also a great place to see growth of the office and industrial markets at the grassroots level – because if it’s working in Worcester, it will work pretty much everywhere else. And it’s a mixed picture. The shopping centre development is the result of some tense local politics. Worcester is perhaps the only city in Britain to have rejected the idea of a John Lewis store or at least the prospect of one as part of an out-of-town scheme. In July 2016 a heated council debate saw claims that 2,000 years of city history were at risk from a retail park proposed by Landsec. By January 2017 the developer had recognised local reality and abandoned its 398,000 sq ft Worcester Woods scheme which, alongside a John Lewis At Home, would have included a Next home store, Sainsbury’s and M&S. New lease of life for Cathedral Square The city council instead threw its weight behind the redevelopment of the 220,000 sq ft Cathedral Square, which already had planning permission, and which brings 100,000 sq ft of floorspace back into use. Salmon Harvester acquired Cathedral Square’s three-acre site in 2013, paying £23m in a deal with Landsec. The new owners rapidly concluded that the scheme, then 50% vacant, needed to be smaller and more tightly focused. Matthew Meaden, fund manager at Salmon Harvester Opportunity Fund, says: “There was a Nandos in Worcester, but that was about it for leisure. The city council always wanted something like we’ve done at Cathedral Square – an opportunity for leisure development. So we reduced the size and repositioned.” Meaden says Worcester’s demographics are the big appeal. “The thing about ‘Worcester woman’ is not that she’s average but that she’s relatively affluent.” “The city council has always been supportive of the town centre, so it didn’t want to approve schemes like the John Lewis plan that would have unpicked all the work they’ve already done making the city centre appealing. Worcester has learned from lessons across the country where there are plenty of examples of hollowed-out town centres.” Some locals point to neighbouring Gloucester, whose historic centre is dominated by out-of-town retail, as an excellent example of what they don’t want to become. As the opening date arrives, the scheme is 98% prelet – just one 4,000 sq ft restaurant unit still to go – with ground floor rents of about £40 per sq ft, and £30 per sq ft on the first floor. Cathedral Square looks set to be a five-star commercial success. However, it’s notable how prominent the public sector has been in that process. The same can be said of large-scale employment floorspace around Worcester, which perhaps shows how dominant the public sector still is, even in affluent Middle England. Around £72m has been allocated in Worcestershire from the local growth fund. Stoford/Liberty Property Trust’s Worcester Six scheme is a case in point. The site will eventually total 1.5m sq ft of B2 and B8 floorspace, starting with two speculative units of 160,000 sq ft and 45,000 sq ft, and is due for completion this month. Worcs LEP helps fund Worcester Six The £120m project, close to junction 6 of the M5, wouldn’t have got very far without a £10m infrastructure package supported by Worcestershire Local Enterprise Partnership through the Growth Deal. Stoford director Gerard Ludlow says: “This is the first large-scale speculative development in the Worcester area for more than 10 years and clearly demonstrates confidence in Worcester Six. “The £10m cost of opening up the site would be a big call on the M1 or the outskirts of Birmingham, so in Worcester the local growth fund support was very much needed.” There’s every prospect the two speculative units will let quickly. Two design-and build deals, one of 140,000 sq ft and now in solicitors’ hands, suggests there’s demand. But the role of the public sector is noteworthy. Stoford is working on plans for the 1m sq ft Redditch Eastern Gateway scheme elsewhere in Worcestershire, where a similar public sector loan arrangement with the LEP is likely. Quoting rents are £5.75 per sq ft on larger industrial units, a discount on Birmingham and the key to Worcester’s appeal. Gary Woodman, chair of Worcester LEP, says coaxing all Worcester’s six local authorities into agreement is important (Worcester Six is in Wychavon district, not Worcester city). But having done that, their £5m contribution came naturally. “It gives investors like Liberty certainty, and provides an answer to the suggestion that the scheme is never going to happen,” he says. “Without it this site wouldn’t be developed, but we’re seeing some commercial development off the back of mixed housing sites. The task for us now is to keep up the level of speculative building.” St Modwen, which controls a 100-acre Worcester portfolio, is the city’s big noise in mixed development. Jonathan Green, the firm’s Midlands director of asset management, says 150,000 sq ft of new office space is planned along with 120 houses at its Whittington Road site. But it won’t be speculative and might not be quick. “It will take a number of years. If we got design-and-build deals we might add some speculative development, but we will take a cautious view,” he says. The likely scale of development is in chunks of 10,000 to 20,000 sq ft. The industrial/trade-counter market is more robust. The 55,000 sq ft third phase at Great Western business park is now completing, with rents £6.50-£7 per sq ft. “What we build goes quickly,” says Green. Worcester’s economy is doing well. In some respects it’s doing very well. But it is not robust enough to make big risks – or even medium-sized risks – appealing to developers. There’s a lesson there for the rest of the country, which is in a similar doing-ok-but economic condition. Things aren’t bad, but are they good enough? As the summer turns gently into the autumn property deals season, we’ll soon find out in Worcester and across England. It’s the demographics… Surprising fact: collaborative working in Worcestershire leads to county having the fastest growth in productivity in the country. Research across all LEP areas suggests the county has an unusually flexible workforce. Nigel Hudson, head of strategic infrastructure and economy at Worcestershire County Council, says: “The travel to work area covers about 1m punching north into Birmingham and west into Herefordshire. “There’s a higher propensity to work in tech-rich sectors, which brings with it more propensity to be flexible. That is something local employers know and it is good for growth.” Economic growth facts 3% – Worcestershire’s average growth rate 2010-2015 1.3% – Worcestershire’s unemployment rate. 1.9% – UK unemployment rate 2.4% – Midlands unemployment rate Source: Worcestershire County Council and ONS