Last month, Property Week revealed that in partnership with Legal & General (L&G), Bruntwood SciTech had completed the acquisition of the long leasehold of Melbourn Science Park in Cambridge from freeholder TTP.
Chris Oglesby, executive chairman of the JV between Bruntwood and L&G, reveals why it decided now was the time to make its first move into the ‘golden triangle’ and outlines the partnership’s plans for the site.
Why did you choose this site to mark your entry into the golden triangle?
We like the real estate at Melbourn, but we also very much saw the opportunity to develop the park with TTP [a tenant as well as former leaseholder] as a partner. SciTech is not an organisation that acquires individual assets in the location; we like to get scale. And although TTP will own its new building, it will very much form part of the Melbourn campus going forward.
What will your masterplan for the site look like?
There are some very good-quality assets there, and there are some less good-quality assets. And so, what we’ll be doing over a period of time as TTP moves into its new-build, is lease out the high-quality assets and redevelop the remainder of the park.
You are working with the local authority on this scheme. How closely do you like to work with local authorities?
In both science and tech, we were working with a lot of our cities on their local industrial strategies prior to Covid, in response to the Theresa May administration’s development of the national industrial strategy.
Typically, when you start to focus on the economic strengths that will drive our cities’ growth, you find those strengths are powered by science and technology. So, the cities we are working with are very keen to ensure that partners like us are working with them to help develop these sectors of their economies.
It is our fundamental belief that real estate businesses should be working on both generating demand and satisfying demand. The adage of ‘build it and they will come’ rather irritates me, as if the role of the real estate provider is just to supply products. By developing true partnerships with local authorities, the value that we bring is our ability to help them stimulate these growth sectors that will power their economies going forward.
What is happening to yields as science and technology becomes an increasingly popular asset class?
We certainly have seen yields sharpen. The assets that LGIM sold recently are a particular case in point. While we are expecting yields to sharpen because of the shortage of products, particularly in the life sciences sector, we think we may see some rental growth as well.
The key thing from our point of view is that, as a business, we have always looked at where we see the economy of the country going, which ultimately drives the demand for real estate, and aligning ourselves to that.
Real estate businesses should be working on both generating and satisfying demand
In the same way, the business exited from the industrial property of its heritage in the 1980s and moved into providing offices for the growing services sector in our city centres through the 1990s and 2000s.
We have identified the industries that are driving us through the fourth industrial revolution that will power the UK economy, and it is for us as a real estate provider to respond to that. Since we refurbished the Manchester Technology Centre back in 2003, we have been building our model around providing for the growth of these sectors in our cities.
How important is ESG to you?
ESG is absolutely rooted in Bruntwood. I think we are widely regarded as a business that is driven by the purpose of creating thriving cities and looking at all the factors that sit behind that. We were the first UK property company to commit to becoming net zero by 2030, so sustainability is a really important part of our business.
We need to work through exactly what it means at Melbourn, but a really important part of that proposition is diversity and inclusivity across all science and technology. I think we are seeing those industries that have not been particularly good on D&I start to recognise that actually, when looking at the solutions to the science and technology challenges of tomorrow, we need diverse thinking in order to be able to solve those problems. Part of creating these innovation districts is creating places that embrace diversity and allow for collaborative thinking by people from all sorts of different backgrounds.
Have you got your eye on more sites in the area?
We are working with L&G in Oxford at the moment, where they have a partnership with the University of Oxford. And we have a lot to go at in Cambridge with Melbourn and TTP. So while we will keep an eye open for other opportunities, those two will keep us occupied. But we will be looking at broadening and building on partnerships in both places, and reaching out into the wider innovation ecosystems of those two.
Where is the next science or technology property hotspot likely to be?
We are less focused on ‘hotspots’. Regional cities were not hotspots for financial professional services in the early-1990s, but they were where we were working.
As a result, we provided space for those growing sectors of the economy. So while our model is going into areas that are strong in life science and tech, we actually see all parts of the UK economy being driven by these sectors.
Therefore, what we are looking for are progressive partners that are keen to work with organisations like ours to help unlock the potential of their economies in the future, rather than being the opportunistic investor that is going to plant a flag in the hottest place in town and bank on yield compression and market rental growth – that is not for Bruntwood SciTech.
How are things going with the UnitedCity campaign, which aims to support local businesses and the local economy in Manchester during and post-pandemic?
It has been challenging, because we geared ourselves up for a real push to get our cities back open in the autumn but then had the more recent challenges of Covid, which meant the right thing for businesses to do was get behind the containment plan.
But we are gearing up to get companies back into our cities again, now that we have this roadmap. I think one of the single biggest challenges we have is to work with government on how we can get people back into Covid-secure offices before 21 June.
What are your views on the government’s working from home guidance staying in place until that date?
I personally believe we need a roadmap that starts to get people back into offices well before June, at sensible levels of density. This will inevitably be a long process, just like the opening up of other sectors, and if we are starting with people inching back in June, that is crazy and leaves us well behind the rest of the world.
Going back to Cambridge and Melbourn, these innovation districts, these clusters of like-minded science and technology companies, are going to be powering the UK economy in this post-Brexit Britain. They need a level of physical presence, and we are damaging our economy hugely by keeping people at home longer than maybe we need to.