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The objective of this report is to provide the client dk developments on the developmental potential of the fountain south brewery. This is located in Edinburgh, Fountain South East
We will advice the client on the following criteria's
The best use and the optimum layout of the site.
The net development vale at the proposal, the potential vale of the site and the project's internal rate of returns.
The risk associated with the proposal from the developers point of view
The recommended option to purse.
The fountain south east is a property located in Fountain Bridge west of the city centre close to the exchange tollcross and hay market.
It was the property was fountain brewery was located. The brewery is own by Scottish and Newcastle. The fountain brewery was closed on November 2005 and in offer for (freehold) sale with vacant possession by the distinctive owner's Scottish & Newcastle.
Description of Development Site/Location
The foundation bridge area has undergone some drastic changes in the past. The decision to close the fountain brewery has put extreme pressures on the developmental of the fountain bridge areas. Strategically the location at the fountain brewery is an important location which is to the west of the city centre, close to the exchange, toll cross and hay market.
Important waterway, the union canal Incorporate and advantage of having the canal creates an existing opportunity for establishing important yet distinctive link through the fountain bridge area and beyond.
The existing surroundings is dominated by brewery buildings and structures, most of which are redundant. The modern day terminus at the union canal is located adjacent to lochin basin residential development, new office, leisure activity has sprung up.
There are some existing residential properties in the grove street areas and around Gilmore
Place, lochin place, which is located adjacent to some of the key redevelopment sites.
There are some other mix uses of the Fountain Bridge, which includes industrial premises, commercial and leisure which are under use or vacant.
There are three main means of transportation which serves the area efficiently, that is the east west transport routes, the west approach road and Dundee street/fountain bridge both carry high volumes of vehicular traffic into and through the area.
The canal provides some means of transportation for pedestrians and cycle link through the area, but have a great potential for the use of both, leisure sports such like kayaking etc. as part of the long term development plans for the millennium link
The site is relatively flat although the surrounding level rises from north to south towards the union canal. The southern site boundary next to the canal has a substantial retaining wall (i.e. to protect the flat side which is several meters below the level at the canal).
The western boundary is provided by Gilmore park. The eastern boundary is formed by another development site that is the process of being redevelop the building on this adjoining site have already been demolished and the site leveled.
The northern boundary comprises a block of tenement properties forming the north west corner at the site and a main road fountain bridge. The total area at the site is 11,500 meters sq
Analysis of the Market
Edinburgh Market seekers
There are numerous amounts of market sectors in Edinburgh, but we will focus on three sectors:-
"Office market activity in Aberdeen continues at exceptional levels. Annual take up in Glasgow and Edinburgh is around average. Supply of new offices is limited, but the development pipelines are building for 2009 and beyond.
Demand from indigenous companies has continued to eat into Glasgow's already limited supply of grade A and B city centre offices.
Edinburgh office market is 47,050sqm. The total for the12 month period is 83,144sqm. Meeting the Edinburgh 10 year annual average takes up and almost catching up with Glasgow for the first time since 2005.
Take up in early 2008 has been slower due to concerns over the wider ceremony causing occupiers to delay decision.
Total office supply in Edinburgh is currently around 197,000 sqm, indicating a 4% decrease since September 2007.
Edinburgh's office market is still relying on existing occupiers, particularly the legal and professional sectors, rather than new business. Demand continues to favor smaller open plan accommodation, and landlords have been prepared to split floors within larger buildings to accommodate this trend.
Demand far larger offices have however increased to. The re-emergence of pre-letting activity is noticeable in the Edinburgh office market. Maclay Murray & spens took 4,454 sqm at quatormille, while Biggert Baillie LLP and Watson Wyatt worldwide took 2,333sqm at Lochrin square.
Occupier demand is putting pressure are limited grade a office supply. There are six new developments having obtained detailed planning consent totaling 60,496 sqm furthermore there are three large scale development who could gain planning consent during the next 12 months with the prospect of completion from 2010 onwards.
In addition, city of Edinburgh council exchange court (Morrison Street) scheme (16,700sqm) has completed its first round of re-tendering since the withdrawal of developer Callaway. The council is now expected to proceed with the scheme in direct developers.
HBO is exploring the opportunity of a headquarters office development on the fountain south side of Fountain Bridge. This gives confidence to adjoining sites and positive message for the extension of the central business district.
There is evidence of increase in Edinburgh office rental, particularly for suits below 929sqm. Prime rents in central Edinburgh are presently 30 per sqm, with 323 per sqm achieved with letting of 1124 sqm at wavorly gate to Microsoft. Rents will come under short term pressure from both rising construction cost and competition between prospective occupiers". "Ref.: www.ryden.co.uk and www.gvagrimley.co.uk" .
"The industrial property sector is holding up well. The ongoing credit crisis is expected to restore market balance and curb land price with inflation, experts in Aberdeen where property supply is unable to meet demand.
The industrial market continues to produces a strong line of positive stories and the past 6 months has been a period of excellent trading. There is no definite evidence at slow down despite current economic concerns. Nevertheless, over the next six months it is likely that there will be an impact on demand due to uncertainty within the economy as a whole and the difficulty in security credit. Thus many in particular reduce demand in the fledging new building for sale market.
Overall statistical show's steady industrial availability. The industrial property market is in a more balance state compared with previous periods of uncertainty. Obsolete stock formerly used by heavy industry has typically been redeveloped for alternative uses and space released by electronics industry has largely found new uses.
Consequently, rental growth is expected and it is likely that the rental level will be around 65 per sqm rising to in excess of 75 per sqm for units below 929sqm and trade counters
Rents for good quality industrial property in Edinburgh increased steadily in 2007 and 2008 landlords can now expect to achieve prime rents in the regions of 75 - 81 per sqm. In prominent areas such as sighthill on the west side at the city and seafield on the north east side.
On the south side of Edinburgh, EDI's paper mill industrial estate is now fully let. The final unit was let to tiller training school at 60 per .sqm. Preston field development Co. Ltd has commenced phase 2 at Preston Field Park.
Kingshaugh road work are due for completion in summer 2008 and only one unit remain available following prelet to St. Andrews Timber suppliers (1,557 sqm). Howden Joinery (1060sqm) Edinburgh city council (2,332sqm) and express removals (1,418sqm)
To the west of Edinburgh, phase 1 at Newbridge are, the speculative developments, by upland developments, is now completed. Two units are under offer at rents of 75per sqm and strong interest is noted in the remaining 2,787sqm phase 2 will commence later in 2008". "Ref.: www.ryden.co.uk and www.gvagrimley.co.uk" .
"As expected consumer expenditure growth is slowing. This is increasingly reflected in retailers trading performance and in weak rental growth in the retail property market.
In Edinburgh the St. James shopping centre is set for a master redevelopment plans to demolish the existing centre to make way for a 78,975sqm scheme on the same site. John Lewis, the existed anchor, will remain on site with the rest of the scheme being developed by Henderson global investors. Works are anticipated to begin in 2010.
New look is set to take over the state currently occupied by the pride of Scotland at 121 - 123 princess street, and plans to open the three storey 2045sqm store in 2010 Cath Kinston has open its first Scottish store at 58 George street (133 sqm) and charch shoes is opening its second uk store outside London at 59A George street
A high profile opening this year will be the elements in Livingston 4 sqm).
Land securities new 130m extension on to the existing almond vale shopping centre will provide and additional 35,000sqm. Including anchor tenants Debenhams and marks and, spencer (8,361 sqm). Latest retailer to sign up include orange (143sqm) River island (981sqm) and Nando's (423sqm). Strong retailer interest in reported in the remaining units.
Signs of stability are emerging in the UK land market. Residential land values increased 3.6% in Q309. Urban land values rose by 0.2%.
Urban values in the North continue to slide. Falls of -11.8% were recorded in the last quarter. Falls from peak in urban land in the North now stand at -70%.
In London, residential land values are up 8.6% over the last six months, hotel land values have stabilised with a 1.5% increase, while office land values fell -7.3% over the same period.
The improvement in Prime London property prices continued into the third quarter of 2009, as prices in central London rose by a further 4%.
Across the prime markets price growth has been fuelled in part by a lack of stock.
The effect of cash and equity rich purchasers has been particularly pronounced, with only a quarter of Savills' central London buyers requiring borrowing during 2009.
The strongest growth has been seen in the Prime South-West London market (the belt running from Fulham to Richmond) which witnessed 8.4% growth this quarter.
Rental values across Prime central London showed further signs of market stability, similar to last quarter, as rents saw a 1% rise over the last three months, leaving values -10.8% below the peak of the market.
The prime regional and country house market showed their first noticeable quarterly rise since the beginning of the downturn, increasing by 1.9%, leaving prices -17.7% off their peak levels of September 2007.
Looking forward over the next six to nine months we anticipate that more stock is likely to come to the market as sellers seek to take advantage of improved market conditions. This will take some of the current upward pressure off prices.
Scarce debt-funding has already changed the development land market, as the emphasis moves from funding models based on debt financed, short-term returns to those based on equity funded, long-term 'added value' income-streams.
A distinction in value is emerging between easily deliverable, 'oven-ready' house plots and longer-term development opportunities needing infrastructure and substantial investment prior to delivery. We expect the market for 'bulk land' to take much longer to recover.
There is now the opportunity to add value through place making and turning bare land into deliverable plots or even income-producing residential and mixed use investments instead of just holding strategic land and waiting for recovery." "Ref.: www.ryden.co.uk and www.gvagrimley.co.uk" .
PROPOSAL FOR SITE USE
From the market result the best and optimum use for this site would be a residential block.
There are plenty of potentials associated with the area in term of investment
The union canal can be use for tourist attraction and recreation fishing. There are hotels malls and retail stores in the area and office building giving it rise for quality housing. There are prospects for the housing development. The RSV budget shows that we can purchase the land, develop it and keep it for long term investment. Purchase the land and develop it keep it for long term investment.
ATTACHED ARE THE RSV BUDGET, DISCOUNTED CASH FLOW, AND INERNAL RATE OF RETURN, NET DEVELOPMENT VALUE AND OTHER KEY DUDGET VARIABLE.ALL FIUGURES WERE REFERENCE FROM THE FOLLOWING SITES, BANK OF SCOTLAND ,SPONS PRICE BOOK