Decision details

Shell Store Incubation Centre

Decision Maker: Cabinet member corporate strategy and budget

Decision status: Recommendations Approved

Is Key decision?: Yes

Is subject to call in?: Yes

Purpose:

To seek approval for the refurbishment of the "Shell Store" building, within the Hereford enterprise zone, to enable the construction of new incubation and research space facilitating business investment and job creation.

Decision:

THAT:

(a)           the refurbishment and conversion of the redundant “Shell Store” building into 2,137 sqm of commercial and research floor space on the “Skylon North” site within the Hereford enterprise zone as identified in appendix 1, and at a cost of no more that £6.498m be approved; and

 (b)      the programme director growth be authorised to take all operational decisions necessary to implement the above recommendation including  planning and funding applications, procurement and contractual steps within the approved budget.

 

Reasons for the decision:

The principal reason for support is the impact on productivity, job creation and hence economic value.  There is a proven demand for high quality start up or grow on business space to rent on the EZ which is not being met by the private development market.  The EZ is unlikely to meet its full jobs targets, or maximise business uptake (and hence business rates returns) unless it accommodates the full range of business development opportunities.

 

Alternative options considered:

Not proceeding with the development

Advantages

This option would mean that the council would not have to utilise its approved self-financing borrowing capability; the council would not be exposed to the risks associated with this project.

 

Disadvantages

This option would result in a continuing lack of start-up space available to rent within the Hereford enterprise zone (EZ), and wider Hereford city, and an identified need and demand not being met.

Should the council not proceed with the development but market the site for sale as commercial land it is unlikely to receive a positive value given the considerable demolition and reinstatement costs associated with the clearance of the building.  This is considerably less than the end value of the proposed scheme.

The full potential of the EZ would not be realised in terms of built floor space and jobs created.

 

A partnership approach procuring a development partner to provide finance and expertise

Advantages

This would involve the private sector taking an element of financial risk in the project with a corresponding reduction in the council’s financial risk.

An experienced development partner brings with them commercial imperative and requisite expertise.

 

Disadvantages

We have tested the market and there is no interest amongst private sector developers to become involved in the redevelopment of a historical building, particularly given the relatively small floorspace and intention to let on short term flexible leases, which would be limited to certain specific sectors targeted by the EZ.  In addition a private sector investor would require a profit margin and that would increase total project costs.

 

Reason Key: Expenditure;

Wards Affected: Dinedor Hill;

Contact: Nick Webster, Economic development manager Email: nwebster@herefordshire.gov.uk Tel: 01432 260601.

Publication date: 09/08/2017

Date of decision: 09/08/2017

Effective from: 17/08/2017

Accompanying Documents: