Interview: Downing’s John Clegg discusses workspace in Liverpool
As Downing continues to refresh another prominent Liverpool city centre office building, property manager John Clegg reflects on the contribution the firm has made to workspace in the city and looks at what lies ahead.
Interview by Natasha Young
A desire to keep busy and make progress is somewhat of a driving force behind property firm Downing’s business decisions.
The Liverpool headquartered firm has sold a number of the city’s prominent commercial buildings in recent years, but not before investing the time and money to transform them into the viable workspaces they’ve become.
Even the architectural gem that is the Port of Liverpool Building – one of the waterfront’s much-loved ‘Three Graces’ – couldn’t tempt the company to keep it within its portfolio once the mission to breathe new life into the landmark was accomplished.
Following works to bring the prominent asset up to Grade A equivalent standard, it was acquired by an international investor for in excess of £27 million in 2015.
“Dry investments are not something [founder] George Downing is interested in,” explains John Clegg, head of property management at the company. “We hold [properties] if we need to but we’d rather be doing something.”
In terms of the Port of Liverpool Building’s overhaul, doing something meant “absolutely everything,” recalls Clegg, pointing out that Downing’s ambitious multi-million pound scheme dealt with reviving the Grade II-listed property’s striking dome right down to the lining of its basements.
“We’d just bought that building when I joined the company and it was in a shocking state of repair – there was water pouring everywhere, everything you could think of, and nothing worked,” says Clegg, who became part of the Downing team in 2005 as it expanded with an in-house property management function.
“When we finally sold the Port of Liverpool Building it was with great reluctance because it had an emotional attachment for us and broke our hearts really, but it was the right thing to do,” he adds. “And when we did sell it, with all the occupants like Rathbones which is a major tenant there and had expanded a few times, it was around 96% let.
“Dry investments are not something George Downing is interested in.”
“I don’t think that would have happened without us – it was just sitting there, doing nothing and tenants were leaving, and I think without someone like Downing it wouldn’t have had its fortunes turned around.”
Clegg suggests Downing’s multi-faceted operations as a developer, construction company and property manager have helped it take on such projects and enhance numerous buildings’ contributions to the Liverpool office market.
“We can do things quicker and more lightly on our feet, and we have every discipline you need under one roof,” he explains. “That’s got to help.”
Other Downing commercial success stories in the city, all of which are initially said to have “required a lot of work”, include Hope Street’s mixed-use Federation House, which was similarly transformed on a smaller scale before being fully let and then sold to the Robert Smith Group for £2.25m.
Derby Square’s Graeme House office building was also snapped up by M7 Real Estate for £8.07m having been upgraded and overhauled to include workspaces including the firm’s Flexi-Office suites.
“Graeme House is one which we sold last year, and that was more than 90% let again and we just couldn’t do any more with it,” says Clegg, who previously spent more than 15 years working within Liverpool City Council’s estates department with roles ranging from estate management to regeneration.
Whilst the offloading of such sites has seen Downing increasingly shift its focus to the student accommodation sector it has always had a hand in, current involvement in the office market appears less widespread but no less vital to Liverpool.
A continuing project to bring No.1 Old Hall Street right up to date for business occupants and make it “live up to its address” has already attracted a Pret A Manger coffee shop to the site, and a refreshed reception area with access to a new Grade A-style 5,100 sq ft office is on the way.
The office, opposite Moorfields station in the heart of Liverpool’s commercial district, is heading to the market as a lack of workspaces fitting the highest specification continues to be a challenge for the city.
“It will make a difference,” says Clegg. “It’s only one building at the end of the day, but because of where it is I think it carries quite a lot of importance.”
Liverpool’s 2018 Office Market Review, released earlier this year, reported the highest office take-up in the city’s commercial district since records began, with an extra 583,084 sq ft of occupied space in the hub around Old Hall Street.
The research, in turn, highlighted the lack of vacant Grade A space now available in the central area, with concerns also being raised over the “limitations” the existing stock has to fill the void through refurbishments.
Clegg is a little more optimistic about the current state of Liverpool’s offering though.
“I think you have to be careful with the numbers,” he says. “For example [the Liverpool Office Market Review] says the supply is down to just over 700,000 sq ft and that’s halved in three years and only half of that is ready to occupy.
“That’s true, there’s nothing wrong with that, it’s just that a lot of the stock we used to have in the city was not fit for purpose so to me it’s not a great loss and it has left us with a better tone of space.
“No.1 Old Hall Street is only one building at the end of the day, but because of where it is I think it carries quite a lot of importance.”
“Again, we have no Grade A space but some of that is down to definition as anything after five years is no longer considered Grade A space, but to my mind there still is Grade A space with the likes of St Paul’s Square and No.1 Old Hall Street.
“What we don’t have is a big chunk of Grade A so whilst we can provide 5,000-10,000 sq ft lettings, and I think there were three over 20,000 sq ft last year, we can’t provide 100,000 sq ft or a bigger stream of investment enquiry or a consolidation exercise like HMRC has done in the past.
“We can’t do that readily now so it’s right to point out that we do need more Grade A, but there is some.”
According to Clegg, it’ll take time for Liverpool to find a solution which can meet 100,000-150,000 sq ft Grade A demands.
“The only one really on the table in the commercial district is Pall Mall and it looks like that will happen but it won’t happen immediately.
“Then if anyone else wants to dip their toe in the water, whilst rents are growing and rent-free periods are coming down it’s not really the rents you need to make it work, so we’re still some way short on our headline rents on what we need.”
Downing, which now has a predominantly student accommodation focused “very strong pipeline” of schemes spanning from London all the way up to Edinburgh, is not ruling out further ventures into office and commercial schemes in the future.
“I think we’ll always look at anything but things changed in Liverpool with the residential conversions, where office stock that wasn’t picked up which we might have looked at suddenly became more valuable and had more bidders on it,” says Clegg.
“By then we’d already started to shift our focus back to students, just because of the way the market was and the opportunities that were there, so right now that’s where our pipeline is and that’s what we’re doing but everything changes.