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How to build Engine Shed 2 as a home for high-tech high-growth businesses in Bristol in the face of risk averse property investors

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Written by: Gavin Thompson | Posted 09 July 2015 13:40

How to build Engine Shed 2 as a home for high-tech high-growth businesses in Bristol in the face of risk averse property investors
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However you add it up, the Engine Shed has been a runaway success. The business centre housed within Brunel’s original Temple Meads Station is now home to a host of remarkable businesses.

So the idea of expanding it and breeding more success is a no-brainer.

Unfortunately it’s not quite that straight forward. First you’ve got to find a site.

One of the key elements to the success of the centre has been the way it brings together a host of high growth hardware and software technology companies.

They share social space and feed off one another’s enthusiasm, energy, ideas and expertise.

It also has organisations such as Invest Bristol and Bath and the West of England Local Enterprise Partnership on site, which both keeps it in the mind of policymakers and helps them showcase the Bristol region to would-be investors.

If the second phase is not very close by, it won’t share that buzz and therefore is unlikely to be such a success.

But while the location has yet to be revealed, those behind the project are confident they have a plan.

Then you need planning permission. Tricky when you are working around a Grade I listed building, but not impossible with the backing of key stakeholders such as Bristol City Council and Bristol University.

Engine Shed high tech high growth business innovation centre in Bristol

The first Engine Shed was delivered at express pace, especially for a city with an unhappy reputation for not getting things done.

The idea of the Engine Shed came about after the Temple Quarter Enterprise Zone was created. The business plan was written over a weekend in January 2013, and the centre opened in December the same year.

Professor Nishan Canagarajah, Pro Vice-Chancellor for Research and Enterprise at the University of Bristol, believes that success can be repeated.

“Engine Shed is a prime example of a partnership project which has brought huge benefits to the city in a way the private sector isn’t able to do,” he said.

“At the moment it’s full to bursting and a second phase would create room for more companies to move in or expand.
“We’re working closely with the local authority to ensure Engine Shed 2 progresses quickly, creating a vital space and environment where businesses can learn and grow with the necessary support from our SETSquared centre.

“The university plays a key role in developing the local economy and supporting initiatives such as the Engine Shed is vital to this ambition.”

But there is a much tougher obstacle to overcome, as Jo Davis, regional director at planning consultants GVA Bilfinger sets out.

“The big problem is funding,” she said. Not just for Engine Shed 2, but any such flexible office space for smaller tenants.

Her colleague Gordon Isgrove explains that the people who fund offices are institutional investors, big pension funds and the like, who want a secure long-term return.

“They want a triple A occupier in a modern office building,” he said. “Start-ups are higher risk. They haven’t got money, they haven’t got a track record.

The problem is more acute with new build rather than refurbishment.

Gordon said: “You can tart up a building for £40-50 per square foot but to build it new is more like £120 per square foot. And you can’t charge these companies the £28 per square foot in rent (that a big accountancy firm might pay), it’s more like £20.”

So the people with the money aren’t keen on riskier investments with lower returns, understandably.

Jo says even developers who do operate in this market, such as TCN which created Temple Studios, or Verve, which is behind Paintworks, need to find funders to support them.

But she thinks things have to, and will, change.

“With the move towards smart cities over the next 10 years, we will need more of that sort of space rather than less,” she said. “The institutional funds need to catch up.

“We need somebody to build this sort of office to kick things off.”

There are ways to get around the problem. In North Somerset, in order to get a new office development built in the J21 Enterprise Area, the local council has pre-let as the headline tenant and will then sub-let the space. It means they take some of the risk away from the developer.

And there are lessons from the first Engine Shed too.

“The high growth technology businesses aren’t the Engine Shed tenants,” explains centre director Nick Sturge. “The tenants are the incubators – SETsquared and WebStart Bristol, as well as Invest Bristol and Bath and the Local Enterprise Partnership (LEP).”

That means the investors need to have faith in the incubators and accelerators, which in turn let out the space, rather than individual smaller companies. That provides a degree of certainty.

Nick is confident Engine Shed 2 will happen, despite a big funding gap at this stage.

“It wasn’t difficult to secure support for the idea,” he said. “We still need to finalise a proper business plan setting out how we can ensure occupancy.

“We’ve estimated it’s a £10 million project. The LEP has committed, subject to the business case, £4 million so we are short by £6 million.

“We are talking about whether to have private sector partners, such as investors and venture capitalists involved or it’s possible we could keep it within the public sector domain, we’re exploring all the options.”

The involvement of the council and the university in the Engine Shed project means it has slightly different aims than a purely commercial set up.

“We will want full occupancy but we deliver that by understanding what Bristol and Bath needs and getting the right type of companies that will stimulate growth in the region,” he said.

“The Engine Shed has certainly stimulated growth. Engine Shed 2 will continue to do that, it’s not just creating office space to let. We hope to encourage innovation activity, there’ll be more collaboration space plus grow on space.”

One area it has stimulated is the office space market with more places looking emulate its success. The former Companies House offices in Temple Way is the latest example.

But Nick says there is still a gap for the companies who are taking the step up from perhaps 10 to 30 people, but can’t yet afford the traditional office nor have the confidence to take on the longer lease.

Boxworks is an extension to the Engine Shed business centre in Bristol built from shipping containers

Engine Shed 2 is due to be open in the second half of 2017. To fill the gap until then, a collection of shipping containers are about to be delivered to the car park to be converted into temporary office space called Boxworks, pictured.

The timeframe is hugely ambitious, especially as it’s due to be 52,000 square feet, twice the size of the original. But Nick wouldn’t have it any other way.

“If we want to get it done we have to push,” he said. “That’s the entrepreneur’s way.”

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