Office development paused due to coronavirus

Published: 17 August 2020

Plans to create a new office space in Derby have been paused for review due to the impacts of coronavirus.

In December 2018, Council leaders approved investment in 42,900 square feet of new high-quality offices on Full Street. The purchase of land at One Cathedral Green, together with borrowing of £12.1m to finance the development itself was hoped to produce a commercial development with a positive rate of return for the Council.

But now, with a significant rise in home working and a reduction in demand for office space as a result, the Council must review this investment in a radically altered post-COVID world.

The Council remains determined to build back better, as it embraces this new normal and will now look at the One Cathedral Green site and consider with its private sector partners what the most appropriate future use for this important riverside area.

Councillor Matthew Holmes, Cabinet Member for Regeneration said that the decision hadn’t been taken lightly, but was one that took Derby’s priorities and future into account;

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. Given the current market conditions and lack of demand currently, it is felt that continuing would have had 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 up front. Unfortunately, because of COVID, 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. As a Council, we must respond to these changes – particularly regarding the projects we facilitate or invest in.

Cllr Holmes continued;

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.

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 – remain confident about the city’s future.

Paul Simpson, Derby City Council’s Chief Executive, chairs the Task Force. He said that Derby was in a strong position, with economic recovery efforts hailed by Government.

Securing the future of the city centre is a key priority for us – we’re determined to build back better from COVID, and that means tightly focussing 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. 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 Government who see Derby’s potential, and we need to continue our focus on diversifying the city centre.

Task force leaders have been supporting private sector investors to continue with new developments in the city. Companies behind schemes worth more than £450m have reiterated their confidence in the city and pledged to deliver their projects.

Nick Richardson, Managing Director of Wilson Bowden 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. Whilst 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. 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.

Business, Regeneration