Authorities had hoped the multi-million pound riverside office development would produce positive return
Plans to create a multi-million pound office development in Derby city centre have been halted due to a rise in home-working caused by the coronavirus crisis.
Towards the end of 2018, Derby City Council granted planning permission for the 42,900 sq. ft. office development at One Cathedral Green, in Full Street, close to the River Derwent.
The purchase of land, together with borrowing of £12.1 million to finance the development, was hoped to produce a commercial development with a positive rate of return for the local authority.
But now, with a significant rise in home working and a reduction in demand for office space as a result of Covid-19, the city council has announced it is reviewing its investment.
It will now look at the One Cathedral Green site and consider with its private sector partners what the most appropriate future use for the site will be.
Councillor Matthew Holmes, the city council’s cabinet member for regeneration, said: We know that coronavirus has had a significant impact across the country, and Derby is no different. What was right for the city last year, may not be right at this point in time, and we can’t press ahead without taking everything into account. We put all options on the table; to go ahead with the project, to delay or to stop at this point in time.
He said, given the current market conditions and lack of demand currently, it is felt that continuing would have carried significant risks and we need to make sure we’re taking care of the tax-payers’ purse.
As it was originally planned, the proposal to build offices at Cathedral Green would have created a long-term rental stream. This would have repaid the money the council invested upfront. Unfortunately, because of Covid-19, this level of future income is now very unlikely. Even in the longer term, businesses may now be rapidly moving away from a reliance on traditional office space, he said.
As a council, we must respond to these changes, particularly regarding the projects we facilitate or invest in. This has been a tough decision to make but is the right one given the current market and uncertainty about the future. We do strongly believe that the city centre has a role as a location for office provision. By making this decision, we are now giving ourselves time to make sure we, and developers, are able to adapt to those needs, Holmes said.
Derby’s Economic Recovery Task Force, a group made up of leaders from both public and private sectors to lead Derby’s economic recovery from the effects of the coronavirus crisis, has said it remains confident about the city’s future.
The task force is chaired by Paul Simpson, the city council’s chief executive.
He said: Securing the future of the city centre is a key priority for us – we’re determined to build back better from Covid-19, and that means tightly focusing our energy and resources on key projects to get the best for the city.
This development isn’t right for Derby right now, so I commend the decision. We are working with important stakeholders from the private and public sector to precisely understand the impact of the crisis on Derby city centre’s business community, he said.
Simpson said, armed with this information, we will be creating a radical new plan that will see more creative business and support within the central area for entrepreneurialism and business growth. We also hope to increase the amount of green space.
City living and quality of life will also be a key focus for us – creating more homes, and flexible workspaces and looking at the economy more widely. New flexible offices will be built at a smaller scale as part of the city’s exciting Becketwell initiative.
We’ve already seen massive support from private developers and the Government who see Derby’s potential, and we need to continue our focus on diversifying the city centre.
The developer set to deliver the One Cathedral Green is Wilson Bowden.
Managing director Nick Richardson said: Clearly, having progressed to this stage it is very disappointing that the council has decided not to proceed, although we understand the city’s nervousness about the future.
While working from home has been a short-term solution, we do not believe it is a long-term one. We acknowledge that there are some functions that can be fulfilled from home, indeed some potentially better achieved at home. However, the office environment fulfils many functions that are better done in the office such as collaborative working, team meetings, negotiations, motivation, culture, mentoring and networking, he said.
Richardson said, looking forward, we expect to see a hybrid of working part of the week from home and part from the office, so we still see an important role for the office. This shift in working pattern was coming down the line anyway – Covid-19 has just accelerated it. Getting people back into the office will be key to re-energising our city centres until we can get people back living in the city. This is happening but has a long way to go.
The articles are for information purposes only and Invest for Property shall not be held responsible for any errors, omissions or inaccuracies within it. Any rules or regulations mentioned within the website are those relevant at the time of publication and may not be the most up-to-date.
Invest for Property does not endorse any of the products or services that appear on it or are linked to it and are not liable for any action that you may take as a result of the content of this website, or losses or damage you may incur doing so.
There is no obligation to purchase anything but, if you decide to do so, you are strongly advised to consult a professional adviser before making any investment decisions.
Please remember that investments of any type may rise or fall and past performance does not guarantee future performance in respect of income or capital growth; you may not get back the amount you invested.