May 8, 2015
What connects Brad Pitt’s blockbuster zombie movie World War Z, a snake venom expert and a global pharmaceutical giant? The somewhat surprising answer is Discovery Park in Sandwich, Kent.
The science park was purchased by co-owners Trevor Cartner, Chris Musgrave and Ray Palmer in 2012, after the then owner-occupier Pfizer decided to sell and vacate its longstanding R&D facility, with the potential loss of hundreds of jobs. Thankfully, after carrying out a review, Pfizer decided to retain 10% of its workforce at the facility and after completing the sale it leased back around 10% of the park’s office and lab space, leaving Cartner and Co to find tenants for the remaining 90%.
As the three-year anniversary of the site’s acquisition draws ever closer, Discovery Park’s managing director Paul Barber spoke to Property Week about the progress the park’s owners have made in filling that space and the plans for the next phase of its development.
When the opportunity to purchase the site came up, Cartner and Musgrave were obvious candidates. Along with Barber, they had overseen the transformation of the former Samsung manufacturing centre on Teesside, which they snapped up in 2005 after the electronics giant announced it was withdrawing from the UK to move its manufacturing to the Czech Republic. The original 200-acre site, which was renamed Wynyard Park, has grown to 600 acres today and is home to numerous occupiers.
“When we heard in 2011 that Pfizer was going to withdraw from Sandwich, we thought we’d done it once in a potentially more challenging location so maybe we could do it again,” recalls Barber. “We came down, had a look around and we bought it on 31 July 2012.”
Pfizer’s decision to occupy 10% of the space, allied with the fact that the pharmaceutical giant’s presence immediately attracted four other tenants, reinforced the new management’s belief that they had made the right decision despite the Herculean task ahead of them.
“Some people thought we were brave, some people thought we were a bit mad. It was a fantastic site with fantastic buildings, but it was so specialist and only designed for a single occupier. Plus it had quite significant running costs and was in a location that a lot of people felt was pretty dreadful, so there was a bit of scepticism as to whether or not there would be demand for the space and whether we had bought a white elephant.”
The biggest technical challenge the new owners faced was subdividing the existing space to suit occupier requirements. “In some cases this was straightforward, but in others it was a bit more of a challenge because the buildings were never designed for multiple occupation. You can’t just put walls where occupiers want you to put walls because it could affect the way the air-handling system works and there are fire escape routes, which need to be protected. We’ve learned through the process of doing it how best to do it effectively.”
What Barber also learned was the necessity to offer potential occupiers utmost flexibility in lease terms. This entails allowing companies to increase or decrease the amount of space they’ve taken if they have under or overestimated their office needs. “We simply tear the lease up, move the partition where it needs to be and then change the lease. To us having happy tenants is better than just having tenants we’ve tied to a lease.”
The strategy has clearly paid off in spades. Today the park has 110 tenants with around 60% of the 1.2m sq ft net usable floorspace occupied. A further 15 deals to occupiers are currently going through legals and ten of these are expansion deals to existing tenants.
The current tenant mix varies wildly, from quirky niche operators such as the venom expert who works out of the park’s lab space, through to any number of non-science companies, such as lawyers, accountants and web designers, who are attracted by the site’s enterprise zone status, which means business rate relief of up to £55,000 a year for the first five years of occupancy.
In the early days, immediately after Pfizer’s exodus, in addition to slowly building rental income from office occupiers, Discovery Park also generated revenue from TV and film production companies thanks to the site’s quirky mix of space. The first series of Sky’s drama The Tunnel was filmed there (the production crew are currently on site filming the second series), as was a sequence for Top Gear and numerous scenes for the aforementioned World War Z.
“Unashamedly in the early days we pretty much took anyone’s buck,” says Barber. “We’d accounted for the fact that our running costs were going to be way higher than our rental income so when film companies approached us asking to use the site we said fine.”
Works ahead
As the site increasingly fills up there will be less emphasis on attracting this type of activity and it is anticipated that the next phase of the park’s evolution will more or less put an end to this sort of thing.
Discovery Park’s owners recently received planning permission for 1.2m sq ft of additional B1 accommodation – either offices or labs – and have outline consent for a supermarket and 500 residential dwellings, as there is currently around 70 acres of undeveloped land on the circa 220-acre site. Barber expects work on the latter to start late this year or early next, with the site owners due to appoint a housing partner to deliver the residential element.
“That’s partly to bring in some more income, but also because modern companies don’t want to come to where there’s just 100% business space – we want to embrace the ‘total place’ concept,” he says.
Work on the additional office space will only commence if a requirement for a standalone single-occupier office or a massive prelet comes forward, but given that the majority of the park’s deals are in the 2,000-3,000 sq ft region, and that the site could accommodate requirements of up to 50,000 sq ft in its existing footprint, there is still plenty of space for the foreseeable future. The current quoting rent is circa £25/sq ft, which is higher than the norm for this part of east Kent, but Barber repeats that when it comes to agreeing leases flexibility is the overriding principle.
“One of our mantras is there isn’t a deal we can’t do,” he says. “If someone likes the product and the location, but wants us to be flexible on the terms, whether that’s on the rent or on lease length, so long as overall it works for us we can trade a bit of rent for a longer commitment or vice versa.”
This flexible approach, which has already served the park’s owners so well, looks set to stand the Sandwich site in good stead for the future as it embarks on its next voyage of discovery.
Author: Simon Creasey, Property Week
Link: http://www.propertyweek.com/news/offices/interview-owners-of-kents-discovery-park/5074381.article