Agenda item

6.1

The Committee received a report from the Director of City Centre Development, providing an update in terms of the Sheffield Retail Quarter – Heart of the City Phase 2.

6.2

In attendance for this item were Councillor Mazher Iqbal (Cabinet Member for Business and Investment) and Nalin Seneviratne (Director of City Centre Development).

6.3

Councillor Mazher Iqbal stated that although it had taken a considerable length of time to reach this stage, construction works in respect of the Sheffield Retail Quarter – Heart of the City Phase 1 had now commenced, with the construction of the HSBC offices being at an advanced stage.  He stated that with this development, and the improvements, and further developments to be made, in respect of The Moor, major steps would be taken in terms of the transformation of the City Centre.

6.4

Nalin Seneviratne introduced the report, which set out details, including financial information, with regard to the delivery of Phase 1, together with information on the plans for Phase 2.  Mr Seneviratne referred briefly to the history of the scheme, specifically to the reasons for the delays and reported on the development works in respect of Phase 1 of the scheme, which included 56,000 square feet of new retail and leisure space, together with 140,000 square feet of new offices, with a major pre-let to HSBC.  The Phase 1 works were focused around high quality public realm, linking the development to the redevelopment of The Moor, and the decision by HSBC to retain their offices in the City had been viewed as a major driver in terms of future development plans.  He stated that work was continuing in connection with the revised Masterplan, which it was hoped would provide a catalyst both in terms of those companies who had expressed an interest in renting space, and new companies being attracted to the City, and which would hopefully be completed sometime in early 2018.  Mr Seneviratne indicated that the Council was very mindful of the changes in current retail offer, and had recognised the importance of the leisure component of such large retail schemes in the light of the change in shopping behaviours, and that this change would be reflected in the revised Masterplan. 

6.5

Members of the Committee raised questions, and the following responses were provided:-

·             The Council was currently in discussions with John Lewis, in connection with their involvement as part of the scheme, and it was hoped that there would be further to report on this issue in early 2018. 

·             Whilst the overall construction cost of the scheme had previously been reported as totalling £350 million, the Council won’t necessarily have to deliver the whole scheme.  As part of the revised Masterplanning process, the Council was currently working on where it needed to invest. 

·             In terms of the land assembly and enabling works, which totalled £61.2 million, this work, which included a number of Compulsory Purchase Orders, had been largely completed, with the land being secured for development.  The only outstanding work in connection with this involved the need to agree terms with one or two tenants. 

·             The retail and office elements of the scheme were being undertaken as an investment, with planned cost recovery through a sale of the completed building or through rental income received by retaining ownership.  The exact exit, or sale route, would be determined after considering the relative values and merits of the options available.  Whilst there was always going to be an element of risk attached to this practice, it was considered that such risks were small. 

·             Discussions in terms of the cost options were to be held in early 2018 between the Cabinet Member for Business and Investment, and other relevant Cabinet Members, and the Director of Finance and Commercial Services, after the revised Masterplan had been drafted. 

·             As a result of the non-disclosure agreement between the Council and HSBC, it was not possible to report on the rental value of the Company’s office space within the overall scheme.  The total area of office space to be occupied by HSBC was nearly 140,000 square feet, including new offices and atrium.  In addition, a further 25,000 square feet of office accommodation was being constructed.

·             The ‘Click and Collect’ arrangement operated by John Lewis would be maintained and catered for as part of the new development, therefore every attempt would be made to ensure that customers could access this facility in their cars. 

·             Due to the fact that the retail sector was struggling nationally, a decision had been made to change the mix of the development in order to accommodate this change.  The original scheme had comprised mainly retail, but it had now become apparent that there was a need to reflect on how shopping had, and would continue to, evolve into more of a leisure activity.  The other aspects of the scheme - office accommodation and residential accommodation - were also deemed important in terms of its long-term viability, on the basis that having more workers in the City Centre would hopefully result in more people using the facilities during the week, and more people living in the City Centre would hopefully result in an increase in such use all week. 

·             The Council was working closely with Aberdeen Asset Management in connection with the future development of The Moor, including securing occupancy of more of the vacant shop units. 

·             There were no details at the present time in terms of the proposed mix of housing as part of the scheme. 

·             There were no details at the present time in terms of secure tenants as part of Phase 2 of the scheme, although discussions had been, and would continue to be, held with prospective tenants.  There were a number of offers from prospective tenants, which were subject to further discussions.  Due to such on-going discussions, which included commercial issues, it was not possible to announce any names at this stage.  However, the Council was confident that, with an excellent team working behind the scenes, announcements would be made sometime early in 2018.  There would also be further announcements in terms of developments in respect of The Moor.

·             Whilst income from business rates was viewed as a key element in terms of the success of the scheme, there had been no conversations with any businesses as regards business rates in connection with Phase 2 of the scheme. 

·             The City Centre masterplan would clarify what arrangements and plans would be taken forward to ensure good access and egress from the City Centre.

·             Whilst there would be huge benefits, specifically in terms of the reduction in air pollution, if companies could offer free delivery of goods ordered on-line, this would result in further costs for the retailers, who were already struggling in a very competitive market.  Whilst the Council had an interest, it was the responsibility of retailers to work out how best they could attract customers.

·             Whilst HSBC were the only major company who had signed up to Phase 1 of the scheme, there would be announcements in terms of other businesses in early 2018.  Work would continue on the revised Masterplan, which was key to attracting further businesses, and when the Masterplan had been completed, this would help to fully market the rest of the scheme, by showing the proposed mix of uses.

6.6

RESOLVED: That the Committee:-

(a)      notes the contents of the report now submitted, together with the responses to the questions raised;

(b)      requests the Director of City Centre Development to attend its meeting to be held on 31^st January 2018, and submit a report on the revised Masterplan and delivery strategy, and providing details, where possible, in terms of further investors in the scheme; and

(c)      thanks Councillor Mazher Iqbal and Nalin Seneviratne for attending the meeting, and responding to the questions raised.