Clearbell completes lab space transformation of former office building.

The building, owned by Clearbell Property Partners III LP (Clearbell) — a fund managed by Clearbell Capital LLP — sits at the heart of London’s Knowledge Quarter which is home to over 100 academic, research and scientific institutions. 

The building’s repurposing as a wet and dry laboratory-enabled space comes in response to a growing need from the capital’s life sciences firms for greater access to high-quality lab space. The new configuration, flue and M&E at 85 Gray’s Inn Road has been designed to accommodate a range of flexible and bespoke fit out options, ensuring compatibility for a wide array of life science functions and R&D specialisms. All available workspace in the building can be utilised as laboratories, with prospective tenants able to conduct their own fit out, or work with Clearbell and lab fit out specialists for a bespoke space.  

Alongside class-leading lab space, tenants will have access to new shower and changing facilities, reception concierge services, cycle storage and a 1,100 sq ft landscaped roof terrace with panoramic views of London. The site is also ideally situated with both King’s Cross St Pancras and Farringdon stations nearby, providing connections across London, the UK and Europe.  

As part of Clearbell’s commitment to placing environmental responsibility at the heart of its developments, 85 Gray’s Inn Road has been developed as such that it is expected to achieve a ‘Excellent’ BREEAM rating and has achieved an EPC B.  

Toby Saul, Associate Director at Clearbell Capital LLP said:

“The life sciences sector is a major asset for UK plc and there remains a widespread shortage of specialist space within London. 

Quality lab space is essential for our most innovative businesses to scale, conduct world-leading R&D and attract talent. This is why we’re so excited by the incredible potential that our transformation of 85 Gray’s Inn Road represents for prospective occupiers.  

“London’s Knowledge Quarter is an exciting place to be and undoubtedly one of the most important hubs for UK life sciences. It’s a prime location for both growing and established firms to find new opportunities for development and collaboration. We’re looking forward to providing a new home to some of those businesses at 85 Gray’s Inn Road.”  

85 Gray’s Inn Road is located close to a number of renowned life science institutions, including the Francis Crick biomedical research institute, University College London, the Wellcome Trust headquarters, and Great Ormond Street hospital. The life sciences community in the area is set to grow in the coming months and years, with the opening of the Dementia Research Institute due in 2024.  

Letting opportunities are being managed by Creative Places and Knight Frank. 

Our reflections on the annual Clearbell Investor Day.

But January is always a month we look forward to, as it’s the time that we host our Clearbell Investor Day — one of the most exciting days of our company’s calendar.

Now in our sixteenth year, our Investor Day brings together those from across our investor community, as well as our trusted partners and other key relationships, as we look back at what we’ve achieved in the previous twelve months.

This year, we made significant headway against our sustainability goals, working on a mixture of 14 light and deep retrofits across UK properties under our management. This includes six office retrofits, five industrial and retail retrofits, and a further three retrofits on properties within our operational joint ventures. In addition, we have increased our rent roll with twenty new leases and successfully exited our mixed-use Amber portfolio, among many other achievements.

Through our patient and considered approach to investment, we have been able to actively move ahead with projects like these, as well as capitalising on other opportunities in the market despite challenging economic headwinds. It’s something we as a team, are very proud of and remain committed to.

So, what’s next?

For me though, it’s the looking ahead that is often more important and this day allows us to reenergise and refocus as we head into a new year full of new opportunities.

As a business we have made significant progress, but we are constantly looking at ways that we can drive forward positive change while also making strong returns for our investors. This was never more evident than through our ‘Responsible’ session of the day where we focused on the changes that need to be made if we are to continue providing sustainable and social value, alongside capital returns.

The two things are by no means mutually exclusive, they’re just a little harder to get right. Fortunately, we’re not scared of taking the road less trodden and we have big plans for the year ahead, which will be delivered by our proactive asset management team.

And I’m also particularly excited to see our development into some more nascent sectors. At a trip to our lab-enabled office asset, 85 Gray’s Inn Road, we heard from Emma Goodford, head of UK life sciences and innovation at Knight Frank, that while Boston, Massachusetts, has 32 million sq ft of lab space, London only has 8 million – so there’s clearly scope for progress in that sector, and we’ve already made good headway.

We also headed to Tradestars, our co-warehousing community in Hackney Wick that launched late last year and is proving to be a successful concept. We will develop the platform further with additional sites, including Islington which will open in H2 2024.

At the same time, we’ll continue to explore areas like single-family rental, affordable student accommodation and multi-let logistics. For all these strategies we have identified the opportunity to exploit cyclical and secular tailwinds into drive the next phase of successful aggregation.

Overall, though, I am pleased to see that there is still as much enthusiasm and appetite for growth and change in the sector — and particularly across our client base – as there has been since we launched Clearbell sixteen years ago. I have no doubt that 2024 will be our best year to date.

Construction begins on Phase Two of Maidstone’s LOC8 Commercial Park.

Strategically located at Junction 8 of the M20, LOC8 represents a significant £47million investment into the local area and has the potential to generate up to 1,200 new jobs. Phase two will realise the site’s full potential and see 185,200 sq ft of space developed across seven units, with completion targeted for Q3 2024.

The development’s first phase was completed in May 2023 and comprised 245,000 sq ft of light industrial and logistics space across 11 units, ranging in size from 5,000 to 60,000 sq ft. Currently, just one unit remains available to let with occupiers including Zehnder, Hitachi Construction, UK Greentech (Part of Edmundson Electrical Ltd) and AT&T all having taken up occupancy at the site already.

LOC8, comprised of prime commercial and logistics spaces, sits in the heart of Kent, immediately adjacent to Junction 8 of the M20 providing links to the key trade hubs of the Thames and Channel Ports and Eurotunnel as well as access to the South East’s large, skilled labour pool.

“There is an evident need for quality commercial and logistics space in the South East with significant shortages hampering businesses and stifling growth. As a key economic hub with significant, long-term growth potential, it’s important that developers continue to focus on delivering high quality commercial and logistics space for the region. LOC8 does just this, providing an ideal location for businesses and industry to attract the right talent and access global markets.

The start of the next phase of works marks an exciting milestone towards completing a project that we set out to deliver when initial works started in 2022 and will support us in our vision to provide more opportunities and returns for our investors and jobs for the local economy.”

Toby Saul, Associate Director at Clearbell Capital

LOC8’s second phase will be developed to a high sustainability specification, with extensive solar panels and EV charging points throughout. The buildings are targeting a BREEAM “Excellent” rating and EPC A & A+. The site also provides for a biodiversity net gain of 10% with 12 acres of new wildlife habitat, including nearly 12,000 new trees and four wildlife ponds.

A new electric bus service to Maidstone town centre and cycle lane have also been created as part of wider efforts to reduce car usage. 

Clearbell purchased the site in 2019 as part of its existing portfolio of multi-let industrial developments, to meet increasing demand for industrial and logistics assets, including from multinational corporations, manufacturers and logistics operators.  Clearbell was advised by CBRE and Caxtons. 

From community to retrofit: key takeaways from the UK ESG Real Estate Agenda.

Over 300 attendees gathered at the annual event that never fails to inspire, spark conversation and facilitate innovation.

Personally, I had so many valuable conversations and took a lot away from the panel sessions, so I have summarised some of my key takeaways below for anyone who wasn’t able to attend:

Capital and carbon now equally important to investors.

My colleague Alice Murray, head of asset management and sustainability, joined a panel session focused on transforming buildings through upgrades and repurposing.

We all know that the most sustainable building is the one that already exists, and with 80% of buildings in the UK today expected to still exist in 2050. this panel explored how we can redevelop those which are no longer fit for purpose with an ESG focus.

One of the most interesting takeaways from this session was the increasing proportion of investors who have changed their analysis criteria over the last two years to focus on capital and carbon returns, rather than just capital returns.

If developers and investors weren’t paying attention to ESG before, they certainly should be now!

Social value needs to be given the same prioritisation as net zero.

When we talk about ESG, most people understandably focus on the ‘E’. Of course, the environmental aspect of ESG is crucial and arguably the most challenging to drive forward at scale but getting the ‘S’ right is also integral to supporting environmental goals.

Communities that are struggling with poor quality homes and a lack of access to vital services disproportionately suffer from deprivation-linked illnesses and struggle to access long-term employment opportunities. This understandably has a huge impact on creating thriving communities, but also stifles environmental progress with focus from the issue detracted.

Creating happy and healthy communities is not only the right thing to do for the people that live there but is also intrinsically linked to supporting the country’s environmental goals.

This was also touched upon in a panel around EV infrastructure and the need to consider access to charging points – we can’t expect people to work towards the UK’s sustainability goals if we do not equip them with the right tools to do so.

Clarity and transparency in reporting is crucial to maintaining asset value.

What became apparent from the panel I sat on, focused on investment strategies and trends within the context of ESG, was that everyone agrees there isn’t the standardisation needed across the industry to ensure assets are being assessed correctly.

Over the years numerous measurement tools have been brought into place from EPCs and BREEAM to NABERS, but as it stands there is no widely agreed metric that the whole industry is using to measure ESG factors.

However, much we may have liked to, my fellow panelists and I do not have all the answers as to how we get to a point of standardisation across the sector. The crucial takeaway is that there is the desire from those across the industry to get there though.

And this was indicative of the mood of the whole day – everyone is keen for change to play their part and to share their ideas, but without government intervention and standardisation across the industry our ambitious aims for net zero are unlikely to be met.

However, it is this passion and desire for change that has left me feeling optimistic about our future, albeit we have a lot of work to do yet!

Smaller industrial and logistics units are back in play.

Investors, in the rare instances where they are willing to deploy capital, are all looking for the same thing: value-add returns at core-plus risk.

With valuations continuing to fall across all sectors, it can be difficult to see where the best opportunities lie. Yields on good-quality London and regional city-centre offices may well be attractive, but there remains considerable downside risk. Rental growth is likely to remain strong across living sectors, but development or operational risk is required to deliver higher returns. So, what about logistics?

According to MSCI, logistics values fell by 27% between June 2022 and March 2023. There was a brief rebound of confidence in Q2, but that seems to have dissipated, and industrial yields are weakening once again. There are now pockets of new-build over-supply appearing in certain locations such as South Yorkshire.

So, while it doesn’t look as if logistics is going to get us out of a hole again as the sector did post Brexit and Covid, that doesn’t mean there aren’t opportunities for those prepared to look beyond the headlines and roll up their sleeves.

We have seen a real discount, confirmed by MSCI data, for single industrial assets in the £5m to £10m range consistently over the past decade. The recent price correction means that good-quality, smaller assets can now be purchased at strong initial yields given embedded rental growth. We haven’t seen this value for many years.

The pricing of these assets is well below replacement cost, which means it is impossible to increase supply at this price point, a key factor to drive future rental growth performance.

The other key driver, in the expected absence of another significant market-yield shift, is the ability to generate a portfolio premium at exit. When meaningful capital returns to the sector – and it inevitably will – it will pay for the ability to access scale, as we have seen in all previous market recoveries.

Of course, aggregation plays focusing on smaller units come with drawbacks, and they aren’t always economical assets for funds to manage. Acquisitions of multiple smaller assets can create significant transactional inefficiencies that threaten to negate any economies of scale achieved by holding many of these properties.

Conventional wisdom might suggest that the largest funds, with more resource and capital, can manage such inefficiencies well, but it’s often the case that significant bureaucratic pressures make aggregation plays difficult for them. This is why this strategy is often better executed by UK local specialist fund managers, who generally have fewer levels of bureaucracy and can be more flexible.

Significant opportunities

Similarly, some funds will be put off by poor energy performance certification on such assets – a common problem for smaller industrial units. The initial investment needed to ensure compliance can be a drag on yields. But for well-capitalised asset managers and those willing to remain focused on sale price further down the line, there are significant opportunities to drive outperformance.

With well-placed investment, revenue can be added through the provision of upgrades, such as EV chargers on site and the ability to provide occupants with power from solar panels.

Another concern for investors, given the current economic climate — and considering the typical target occupant for smaller units — will be the threat of SME failures. Insolvencies are at their highest rate since the financial crisis of 2008–09, and as it’s not clear whether failures have peaked, some hesitancy is understandable.

While not immune to their impact, the diversification present within aggregated small and mid-box portfolios offers a significant hedge against the impact of occupant churn and inflation. Ultimately, despite economic conditions, occupier demand for these units remains robust, and with inflation falling we may be through the worst.

Ultimately, discounted purchase prices, higher yields, great refit opportunities and premiums upon exit are making small and mid-box industrial and logistics units an asset class worth reassessing in these turbulent economic times.

When capital returns to real estate markets, aggregated portfolios of energy performance certificate-compliant units will come into their own. Naturally, such strategies won’t work for every fund, but for those willing to invest in upgrades and be flexible enough to manage multiple smaller assets, there are significant returns to be made, generated by the high running yield and steady asset management: value-add returns at core-plus risk.

How we achieved the Planet Mark certification.

Fund managers work hard to ensure that their assets are performing against sustainability criteria, but this can come at the expense of their wider sustainability responsibilities. In striving for improvements in their assets, they often overlook the emissions produced in the day-to-day running of their own offices.

At Clearbell, we’ve been implementing big changes in the way we approach asset management to have a greater impact across our portfolios from a sustainability perspective. However, in doing this, we were adamant that we would not fall into the trap of ignoring emissions at any level of our operations, including our own office emissions.

In July 2023, we engaged with Planet Mark — which was launched in 2013 and backed by the Eden Project – after identifying them as an ideal partner to work with in our firm’s sustainability drive.

Planet Mark’s Business Certification has a three-step structure: measure, engage and communicate. An applicant will:

• Submit comprehensive data (relating to Clearbell’s office and activities)
• Receive carbon emission reports as well as a personalised action plan on how to improve these figures
• Be invited to join Planet Mark’s community platform to engage with a wide forum of other businesses committed to their net zero journey

The Certification requires significant investment into data collection, submission, and liaison with Planet Mark. Planet Mark struck us as having a robust method for better understanding and improving our own carbon footprint, so we set to work.

The process

The data we gathered included our office’s electricity, water and paper use, as well as our business travel, procurement processes and homeworking information. Planet Mark’s anti greenwashing assurance meant that our submission was subject to extensive checks.

This stage came with plenty of challenges, but it also allowed us to reflect on our responsibilities as a fund manager. Our London office is a rented space, so we had to overcome difficulties to access information on the office’s energy and water use. This is not a unique problem either, many companies struggle to take the first steps towards net zero as they do not have any accurate data to draw on as a starting point. This has pushed us even harder to ensure that tenants of the buildings we manage can more easily obtain the figures that they need to assess their carbon footprint.

Social value measurement

Beyond the environmental element of our ESG commitment, we also chose to look at our team’s social value contribution. This audit broke down what we have provided the community close to our office through the channels of our people, community and volunteering initiatives, donations, and in our procurement chain.

The assessment both recognises our recent community outreach projects and provides a benchmark for future initiatives. It also helps us to scrutinise our supply chain, a great way to ensure that we work with like-minded companies.   

Next steps

This certification is only the beginning of our relationship with Planet Mark. Following the initial report, our whole team will attend an “energiser workshop”, a session to help us better understand our results. The workshop will provide the basis of a comprehensive action plan to reduce our carbon footprint and increase our social value contribution. From there, it will be a full team effort to implement the changes and stay focussed on achieving our targets.

To help with this, we have also developed Clearbell’s own environmental management system aimed to provide colleagues with the tools and skills they need to embed sustainability in the day-to-day management of assets and in the office, as well as enhancing awareness of the firm’s ESG commitments and engagement with its stakeholders and investors.

Planet Mark’s certification serves as a reminder of continued commitment to net zero. As part of the accreditation, we’ve promised that after our second year we will reduce our office emissions by at least 2.5% each year.

Now, more than ever, we understand that sustainability is a journey rather than a destination, and that it is not an individual pursuit – it’s impossible to reach net zero without collaboration.

Clearbell completes sale of five assets from its Polaris portfolio.

The assets, comprising five industrial sites totalling over one million sq ft., were sold to separate buyers in off-market sales. In Sheffield, the two largest assets, Davy Markham Industrial Park and Sheffield Parkway, have been sold to a Midlands based property company and a real estate investment fund respectively.

In Middlesborough, Clearbell has completed the sale of 1&2 Queensway, to Leader Online Ltd. having welcomed new tenants to both units on the site. The smallest of the sites, Hutton Business Park in Rotherham has also been sold. In the six months prior to sale, the units had been fully let.

The final of the five assets, PM House in Sheffield, was sold to a private buyer at auction for £2.3m.

Clearbell acquired the Polaris portfolio comprising assets predominantly in the North of England, in August 2015. Clearbell acquired the portfolio to benefit from the growing momentum in the industrial market, and to reposition secondary assets to drive investor returns.

Rob West, Managing Partner, Clearbell Capital, said:

“The completion of sales on these five key assets is an important step for our Polaris Portfolio and a clear demonstration of our patient, principled and forensic approach. These sales demonstrate that liquidity has returned to well-priced industrial assets. Our investment and asset management teams have done well to capitalise on this, growing income across the portfolio before returning capital to investors.”

Clearbell was advised by CPP and Gerald Eve.

Clearbell welcomes first occupiers to iconic Kodak building.

Clearbell has agreed the first two leases at iconic Kodak Building. 

PubMatic and MASECO Private Wealth take fifth and fourth floors, respectively. 

The recently redeveloped property now repositioned towards Covent Garden, has been designed with wellbeing and sustainability at its heart.  

Digital advertising consultancy PubMatic has taken the entire fifth floor, totalling just over 8,700 sq ft. The business, founded in 2006, has 18 offices globally and is relocating to the Kodak Building from nearby Soho. 

MASECO LLP is taking the entire fourth floor of just over 8,800 sq ft. MASECO is an independent wealth management firm founded in 2008 and headquartered in London. With expertise in both the UK and USA, it works with clients across the globe and has over $3bn of assets under management. 

The iconic Kodak Building has recently undergone a period of extensive redevelopment and repositioning by Clearbell to bring new life into its historic shell. With wellbeing at its heart, the building has been designed to ensure users have high-end commuter facilities including extensive bike racks, showers and lockers, increased access to natural light and communal outdoor space via the large roof terrace.  

Sustainability has also been prioritised, exemplified through the green roof which encourages biodiversity in the middle of the city. As such, the Kodak Building is targeting a BREEAM ‘Excellent’ rating and WELL Gold certification. It has also achieved an EPC rating of A, despite being Grade II listed.  

Alice Murray, Head of Asset Management and Sustainability at Clearbell Capital, said:

“Through the design and bespoke in-house services on offer, we believe that we have created a best-in-class workspace that remains true to the building’s heritage, while also bringing it into the new age of office working.” 

“The first two lettings at the Kodak Building are testament to the quality of the redevelopment and people-centric approach we took, with both firms looking for workspaces that offered an enhanced experience for their employees in the heart of London’s vibrant Midtown.” 

Clearbell was represented by Farebrother and Knight Frank. Pubmatic was represented by Knight Frank, while Avison Young advised MASECO.