While the government’s confirmation that Sheffield’s HS2 station will be located in the city centre is not necessarily the “be all”, had it gone out of town to Meadowhall, as had been on the cards, it could have signalled the “end all” for the UK’s sixth most populated city, writes Lawrence Higgins.
As Richard Wright, chief executive of Sheffield Chamber of Commerce, said of the announcement: “We could not afford not to have HS2. Infrastructure does not guarantee growth, but not having infrastructure can seriously hamper growth.”
The new 250mph trains calling at the existing Sheffield Midland station could be worth £5bn in additional GVA. While the city council can look for forward to an extra £850m in rates revenue, according to CBRE.
Sheffield’s 518,000 population is around 45,000 larger than Yorkshire neighbour Leeds and around 18,000 more than Manchester, but it punches below its weight in the economic rankings.
With a GVA of £41,695 per employee, Sheffield sits at 26 in the Office for National Statistics’ table of the UK’s 32 urban economies: workers contribute around £5,000 less than those in Leeds and also fall below Yorkshire rivals Wakefield and Bradford. Its GVA growth of 11.2% between 2009 and 2015 bettered only three other UK cities.
But with the HS2 station in the heart of the city near the central business district, it is expected to maximise the economic benefits. David Couch, director at BNP Paribas Real Estate in Sheffield, says: “Having a high-speed rail link is vital, it will change perceptions about Sheffield.”
Centre for Cities research shows that the highest skilled and best paid jobs in the knowledge-intensive business services, which have been key drivers for much of the UK’s economic hotspots, prefer to locate in city centres to benefit from networking, public transport; availability of skilled workers and access to leisure and retail facilities.
Sheffield’s City Region Integrated Infrastructure Plan bases many of its economic growth plans on knowledge, creative and digital industries with the city centre becoming a hub for leisure, higher education and financial and professional services, sectors which specialist economic development and regeneration consultancy Ekosgen predicts will see the highest employment growth rates.
Over the five years between 2009 and 2014 the city’s information and communication sector grew by 55.2% and Knight Frank figures show the TMT sector accounted for 22% of 2016 take-up. Research from economic development consultancy Genecon predicts that HS2 will create an additional 520 communications jobs at £60,000 GVA per employee.
Over the five years to 2014 Sheffield’s finance sector contracted by 31%. However, it is hoped that HS2 will kick-start more demand for city centre space from the additional 1,500 banking jobs at a GVA per employee of around £76,000; HSBC taking 140,000 sq ft in the retail quarter could signify the start of this.
Overall the city is performing well, with Knight Frank putting Q1 2017 take-up at its highest for two years, boosted by deals such as Arup taking 16,000 sq ft at CTP’s 3 St Paul’s Place, the city’s first speculative office development for a decade. On the investment side, 2016’s £83m of transactions was the highest for six years, with a record 63% overseas purchasers.
Sheffield has three business districts: Central for professional and financial services; Riverside for larger space requirements and the Cultural Industries Quarter. The aim is that over the next 10 years the three districts will expand and join with the existing cluster of education and creative industries around Midland Station, to form one larger CBD, with three distinct identities. Couch says: “At present the CBD is a bit fragmented. The wider city will benefit by HS2 augmenting the offer and development spreading out and attracting more users.”
Following the HS2 announcement, Sheffield Council is updating its City Centre Masterplan and aims to release development sites such as Sheaf Square; land around Pond Street Bus Station and potentially parts of the Royal Mail sorting office. Rob Darrington, partner at Commercial Property Partners, says: “HS2 will drive development and regeneration. Existing office and retail schemes near the station will see a rise in demand and new projects will evolve in areas of high footfall.”
In total it is estimated that HS2 will stimulate development of 1.7m sq ft of commercial space, of which 1.1m sq ft will be offices.
Colliers International puts Sheffield’s prime office rents at £23 per sq ft, against £30 per sq ft in Leeds, £35 per sq sq ft in Manchester, and on a par with the likes of Liverpool or Newcastle. Couch says: “While values are lower than comparable cities at the moment, they will be pushed up as we see more interest from the blue chips and the institutions.”
Couch says there has already been interest, with speculators looking at the city fringes to purchase sites before expected price increases hit the market.
HS3
Sheffield City council’s joyous response to the news that HS2 would run through the city centre was tempered with the demand that the new line must fully integrate with Northern Powerhouse Rail, or HS3, to create connections to the Liverpool-Manchester corridors and onwards. David Couch, director at BNP Paribas Real Estate, says: “HS2 is important, but HS3 is equally, if not more so.”
HS3 would create a Northern Powerhouse hub based around a Leeds, Sheffield and Manchester triangle, all half an hour from each other, surrounding a national park. ARBA director Richard Burns says: “For many businesses in the North, tangible opportunities posed by shortening rail times between, say, Manchester and Sheffield are of greater benefit than the North-South improvements.”
However, there have been mixed messages from the government. It reneged on a promise to electrify the Nottingham to Sheffield line and transport secretary Chris Grayling said it was the responsibility of the North, rather than the government, to design and manage an improved Pennines rail link. However, Northern Powerhouse minister Jake Berry said it would go ahead. More recently, at the Conservative Party conference chancellor Phillip Hammond announced an extra £300m to improve rail links in the North.
HS2 out of town
Now that it is confirmed that Meadowhall will not get its own HS2 station, it is a case of business as usual. British Land’s shopping centre is undergoing a £60m refurbishment, which on completion will be followed by commencement of a £300m, 330,000 sq ft leisure extension with a new cinema, gym, and flexible space.
Opposite the mall, ARBA Group is developing 70,000 sq ft of office space at Meadowhall Business Park. ARBA director Richard Burns says its business plan always accounted for the fact that HS2 may be sited in the city centre, and he believes that this will still bring many benefits to the development.
Rob Darrington of Commercial Property Partners says that with HS2 and HS3 turning Sheffield into one of the main Northern transport hubs, freight capacity will increase. Darrington says there is around 3.3m sq ft of industrial space in 191 properties within the opportunity zone that will emerge. “The improved cargo service running from the North to London will put these properties on the map with the big warehouse landlords.”
While Burns says that, with the likes of Boeing and McLaren taking space at the Advanced Manufacturing Research Centre and the Nuclear AMRC, along the Sheffield Rotherham corridor, further supply chain requirements will grow in the area.
