Pictured above: Philip Quiggin, Lambert Smith Hampton.

NOTTINGHAM city centre could potentially discourage investors if it does not address its looming undersupply of quality office space according to Phil Quiggin, Head of Office Agency at national commercial property consultancy, Lambert Smith Hampton's (LSH) Nottingham office.

The economic downturn has forced developers to adopt a cautionary approach to new projects which has resulted in a dearth of high-quality space in the city centre's office market.  

While a positive move, Nottingham City Council's recent acquisition of Loxley House in Station Street will wipe out 190,000 sq ft of the space that is currently available.  

The only high-quality developments in the city centre capable of satisfying any major future requirements and which could be taken up extremely quickly are the remaining floors in Waterfront House - a fraction of the size at 34,000 sq ft, and Southreef - a mixed-use development comprising 54,000 sq ft of commercial space, with a further 81,000 sq ft of office space planned for phase II.  

Out of town, the outlook is of a similar nature with the only major business parks capable of providing immediate occupation being NG2 and Nottingham Business Park. Even then, both sites will presently only cater for smaller requirements.

Pictured above: Sentinel

There is a good supply of development sites in the pipeline, including Sentinel - Wilson Bowden's 100,000 sq ft landmark office development on Wilford Road - Peel's Queensbridge Road site, EastsideCity and various other smaller sites which could provide pre-let opportunities.  However, there are strong concerns about deliverability, with developers understandably hesitant to put a spade in the ground without first having secured a pre-let or pre-sale.  

While the city does possess a competitive cost base in terms of labour and land, together with a high-calibre of employees being supplied by the region's universities, these alone are not sufficient to encourage significant numbers of corporates to invest, as and when firm decisions can again be made.  

The net result is that, when the market does enter its recovery phase, increasing levels of demand will be extremely difficult to accommodate.  Not only that, but occupiers will find themselves in an increasingly difficult negotiating position. This could then potentially deter businesses looking to move into the city, opting for other competing cities instead.

Profit margins are not yet attractive enough to support even large-scale speculative development and the situation regarding land values is still ambiguous but, with a general consensus that we have reached the bottom of the market, all eyes are now on the banks to relax their strict lending criteria in order to provide developers with the means to deliver the next products to satisfy the inevitable demand.