Light at end of tunnel
Change in ownership should end delays and cancellations at Haymarket,
AT first glance, it looks an expensive piece of real estate, valued at more than £12 million per acre.
But, once developed, the office space element alone is likely to bring in the same amount in rental income – per year.
This is the long-awaited Haymarket development in Edinburgh, acquired last week by M&G Real Estate for £49.1m.
What they are buying, of course, is not just the land but the planning consent – for three Grade A office buildings totalling 350,000 sq ft, plus a 190 bedroom hotel, a 172 room apart-hotel, and 40,000 sq ft of retail and leisure space.
That is before the scheme gets tweaked again, as is usual when a new owner takes over a project and wants to “put their stamp on it”.
The former railway goods yards are in a tremendous location, adjoining the capital’s busy Haymarket train, tram and bus transport interchange and en route to the business district The Exchange.
This four-acre gap site has had a troubled past, conceived more than a decade ago then stalled by the recession, delays and financial difficulty, but is now back in safe hands.
This leading global real estate investor has more than £30 billion in a broad spread of properties and the fund has consistently done well in Scotland, most recently funding construction of the successful Quartermile 3 and 4 office buildings in Edinburgh and about to develop £100m of workspace at The Grid in Glasgow.
Despite its longevity as a project, dating from 2006, there is still not much to see above ground at The Haymarket. Some of the delay has been caused by the fact that the site is undermined by two Victorian railway tunnels used by all trains between there and Waverley and the rail authorities required extensive re-grouting of the underground walls.
To avoid disruption of the rail timetable, the workmen – nicknamed moles – could only do a few hours at a time after the last train had passed through and before the first journey of the morning. M&G is promising that environmental excellence and well-being will be at the forefront of the design, pledging the highest sustainability standards, state-of-the-art digital infrastructure, technology and connectivity.
They see the location as an expansion of the capital’s growing financial quarter, providing quick and regular train links to Glasgow and tramline to the airport.
Chris Perkins, head of business space at M&G Real Estate, said: “With the current supply/demand dynamics, bringing 350,000 sq ft to the market will reinforce the Exchange District as a prime hub for business in Europe.
“Whilst Edinburgh remains an attraction for heritage tourism, its rejuvenation as a business and leisure destination over the past few years rightly places it amongst Europe’s leading cities.
“As a provider of investment solutions across geographies, sectors and product types, this investment reinforces our strategy of acquiring assets with potential for sustained income and strong capital appreciation, located in targeted growth zones.”
Latest market analysis from Cushman & Wakefield highlights limited stock as the key challenge for the city’s office market, with only one new build scheme, 2 Semple Street (at around 40,000 sq ft), due to complete this year.
The only other under construction, the 122,000 sq ft Capital Square, is already reported to have a third of its space under offer.
So the earlier the better in terms of a start on this major fresh source of supply at Haymarket. Prime rent levels are already at £33.50 per sq ft and will have risen significantly before the office space is completed.
Savills represented the purchaser, with Dougray Smith and JLL advising the sellers, Tiger Developments and Interserve.