Your Councillors

POLICY AND RESOURCES COMMITTEE

28th March 2018

 

Update on The Business Terrace

 

Final Decision-Maker

POLICY AND RESOURCES COMMITTEE

Lead Head of Service/Lead Director

Head of Regeneration and Economic Development

Lead Officer and Report Author

Sean Henry, Business Centre Coordinator

Abi Lewis, Economic Development Officer

Classification

Public

Wards affected

All

 

Executive Summary

This report provides an update on the performance of The Business Terrace, outlining both the financial performance and the extensive business support offer provided through the facility. The Business Terrace continues to perform well, with 100% occupancy of the start-up and grow-on office accommodation and increased income levels over the past two years. There continues to be a lack of “next-stage” move-on office accommodation for businesses graduating from The Business Terrace and officers are exploring options to address this challenge.

 

 

This report makes the following recommendations to this Committee:

1.   That the update on the performance of the Business Terrace be noted.

 

 

Timetable

Meeting

Date

Policy and Resources Committee

28 March 2018



Update on The Business Terrace

 

1.      INTRODUCTION AND BACKGROUND

 

1.1     The Business Terrace opened in September 2015 to provide start-up businesses with affordable workspace and wrap-around business support, addressing a critical element of the Council’s adopted Economic Development Strategy.

 

1.2     The initial phase of the development comprising 6 offices, seminar room, meeting room and 15 desk spaces was operated as a pilot to test the concept and demand, utilising redundant space to which the Council had a long term rental – and therefore financial - commitment until 2023.  The cost of conversion was £250,000. The facility has been expected to deliver a financial contribution to help cover the unavoidable costs only.

 

1.3     Since opening in 2015, The Business Terrace has seen two expansions to address demand for additional office accommodation and grow-on space:

·                Phase 2: In December 2015 the old Members’ area on the first floor was transformed to create 6 new offices;

·                Phase 3: In October 2017 a further expansion on Floor 1 created an additional 5 offices as grow on space for businesses.

 

1.4     In order to reduce the financial costs of the expansion into Phase 3 in October 2017, the Council secured £52,582 funding and a six month rent free period from Capital and Regional - the landlord of Maidstone House – to deliver the capital works required to bring the space up to the required standards.

 

OCCUPANCY RATES

 

1.5     Following these two expansion phases The Business Terrace now consists of 17 offices, alongside hot-desking, with the number of businesses based in the facility as follows:

 

Table 1

 

Date

No. businesses in offices *

No. people working in offices

Hot desk users

Dec 16

18

26

4

Dec 17

29

58

11

March 18

29

60

11

*Note that some offices are multi-tenanted

 

1.6     Target occupancy rates for the offices in The Business Terrace are as follows:

 

 

 

Table 2

 

Period

Target

Actual

End of Year 1

 

30% occupancy

100%

End of Year 2

60% occupancy

100%

End of Year 3

85%

100%

 

1.7     Virtual Offices were introduced in March 2017, providing the option for homebased businesses to have a mailing address at The Business Terrace, providing increased privacy for the business owner and greater consumer confidence in the company’s authenticity. The service is charged at £29 per month (inclusive of VAT) and there are currently 19 in use out of 33, demonstrating scope for further income generation.

 

 BUSINESS SUPPORT

 

1.8     A fundamental component of The Business Terrace offer is the availability of free business support for pre-start, start-up and small established businesses, both for those renting space in the facility and across the whole borough, to assist business formation, survival and growth. The Council has contracts with Let’s Do Business Group and Kent Foundation to provide onsite 1-2-1 advice three days per week and a rolling programme of one-to-many workshops throughout the course of the year. For 2017/18 this cost was £22,200 which is funded from the core Economic Development budget.

 

1.9     This is complemented by an extensive offering of specialist, pro-bono 1-2-1 advice and workshops from Terrace tenants, local private companies and other organisations. Partners this year have included: Innovate UK & University of Greenwich, Kent Business School, Cripps, MHA MacIntyre Hudson, Business Doctors and Outset UK. Appendix A highlights some of the recent events organised and held at The Business Terrace.

 

1.10 Between 1st September 2015 and 15th March 2017, 515 individuals have received support from an advisor on a 1-2-1 or from an expert at a free workshop. 211 of these are at the pre-start stage, 159 start-up and 145 established businesses.

 

1.11 In addition, The Business in Maidstone website hosts an online resource to provide businesses with detailed information, news, blogs and assistance in topics such as tax, employment law and general business planning.

 

BUDGET

 

1.12 The Business Terrace continues to perform financially, with a number of opportunities for income generation harnessed, along with the identification of long-term savings. The budgets for Phases 1& 2 and Phase 3 are held separately for accounting purposes, as shown below. When combined the facility as a whole meets its budget targets for 2017/18, returning a £3,830 surplus.

 

 

 

Phase 1 & 2

 

Table 3

 

 

2016/17

2016/17

2017/18

2017/18

2018/19

Budgeted

Actual

Budgeted

Actual

Forecasted Budget

Unavoidable Costs*

£134,330

£119,580

£133,790

£132,950

£137,150

 

 

 

 

 

 

Operational Costs**

£28,720

£33,870

£30,360

£37,510

£29,240

Business Terrace Staff Management Costs

£12,355

£12,355

£27,640

£27,640

£29,030

Rent Income

-£74,680

-£59,000

-£89,680

-£64,800

-£89,680

Services Income

-£4,670

-£5,650

-£4,670

-£13,280

-£4,690

Net contribution to unavoidable costs

-£38,275

-£18,425

-£36,350

-£12,930

-£36,100

*Rent to Capital and Regional, rates and other premises costs which are unavoidable and not incurred as a direct result of The Business Terrace.

** Includes all day to day operational costs. Does not include central or departmental recharges or depreciation.

 

1.13 It is worth noting that rents in Phase 1 and 2 areas were increased in 2016/17 by an average of 20% and now reflects relative local market rental values.

 

1.14 Variable income is also included within the rent budget line, generated through the rental of hot desks, meeting space and virtual offices, which has increased significantly over the 2017/18 financial year:

 

Table 4

16/17

17/18

2018/19 forecast

Meeting rooms & hot-desks

-£9,220

-£12,335

-£16,000

Virtual Offices

-£145

-£3,120

-£7,320

 

1.15 ‘Services income’ relates to recharges to tenants for services such as parking, telephones, printing and post.

 

Phase 3

 

1.16 The six month rent free period on the Phase 3 area concludes at the end of this financial year, reflected in the forecast expenditure. The forecast shows a surplus of £18,810 in 2018/19 to be used as a sinking fund for reinvestment back into the wider facility.

 

 

 

 

Table 5

 

 

 

October 2017 – March 2018

October 2017 – March 2018

2018/19

Budget

Actual

Forecast

*Total Expenditure

£35,970

£8,140

£53,140

Rental income

-£30,240

-£30,240

-£60,480

Services income

-£5,730

-£5,150

-£11,470

Net contribution

£0

-£27,250

-£18,810

*Includes expenditure on rent to Capital and Regional, rates and other premises costs. No staff management time is allocated to Phase 3 as it is so little.

 

1.17 As an aside, it is worth noting that prior to The Business Terrace coming into operation, the Council was liable for £25,700 business rates per annum on the Phase 1 area. Under the new space configuration each of the offices is viewed as a single hereditament and eligible for Small Business Rate Relief, with the Council’s rate liability now reduced to £6,000 covering the communal areas. Over the remaining term of the lease, the Council has saved almost £157,000 in business rates relating to this space as a result of The Business Terrace.

 

ADDRESSING CONTINUING DEMAND

 

1.18 The Business Terrace continues to receive significant numbers of enquiries from businesses seeking a modern, collaborative and supportive office environment in Maidstone. Given that the facility is at full occupancy, officers are looking at the viability of a further phase of accommodation in undeveloped space on Floor 1 of Maidstone House. It is envisaged that this would provide a mix of additional move-on accommodation for existing Terrace tenants, as well as addressing the needs of external companies seeking to remain in Maidstone, for example those in office accommodation being converted for residential purposes. This will be considered within the context of the Council’s wider lease commitments to Maidstone House.

 

 

2.        AVAILABLE OPTIONS

 

2.1     This report is to note only.

 

 

3.       RISK

3.1    This report is presented for information only and has no risk management implications.

 

 


4.       CONSULTATION RESULTS AND PREVIOUS COMMITTEE FEEDBACK

 

4.1     Members received an update report on the facility in December 2016. This report is being presented as a result of a formal question that was asked by a Member at Policy and Resources Committee in February 2018.

 

 

5.       CROSS-CUTTING ISSUES AND IMPLICATIONS

 

Issue

Implications

Sign-off

Impact on Corporate Priorities

We do not expect the recommendations will by themselves materially affect achievement of corporate priorities. However, they will support the Council’s overall achievement of its aims to “secure a successful economy for Maidstone borough and enhance the town centre”

Head of Regeneration and Economic Development

Risk Management

Already covered in the risk section above.

Head of Regeneration and Economic Development

Financial

Financial implications are set out in the body of the report.  The Business Terrace makes a positive contribution to the fixed costs of occupying its premises.

Section 151 Officer & Finance Team

Staffing

We will deliver the recommendations with our current staffing.

Head of Regeneration and Economic Development

Legal

We have worked with the client department to agree and finalise relevant construction contracts required to facilitate the project. Generally, there are no wider legal implications.

 

Legal Team

Privacy and Data Protection

No implications

Legal Team

Equalities

The recommendations do not propose a change in service therefore will not require an equalities impact assessment

Policy & Information Manager

Crime and Disorder

No implications

Head of Regeneration and Economic Development

Procurement

No implications

Head of Service & Section 151 Officer

 

6.        REPORT APPENDICES

 

Appendix A: Snapshot of recent and planned events at The Business Terrace

 

 

7.        BACKGROUND PAPERS

 

None.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

APPENDIX A

Snapshot of recent and planned events at The Business Terrace

 

October

04/10

Developing a new product or service

Innovate UK & University of Greenwich

11/10

How to Build a Powerful Business Plan That Works

Pro Actions

12/10

Innovation Culture

Innovate UK & University of Greenwich

 

After Hours Club

Kent Invicta Chamber of Commerce

19/10

GDPR Compliance & Cyber Security

1Stop Insurance & Harlequin CDIS

 

November

01/11

Introduction to Lean & 5S

Innovate UK & University of Greenwich

09/11

Building a Sustainable Business

Business Doctors

10/11

Start Up Workshop Week 1 (of 4)

Kent Foundation

16/11

Fighting Fit for Business

The Business Terrace networker

21/11

Disputes: Avoidance and Resolution

Cripps LLP

 

December

07/12

2nd annual Dragon’s Den event

12 companies based at the Terrace pitched to ‘Dragons’ including Alison Broom, Duncan Simmons (Area Director for Metro Bank) and Lesley Bennet (Head of Regional Relationships – South for IOD)


January

18/01

Timeless Principles of Exceptional Businesses

The Alternative Board

19/01

Introduction to Lean & 5S

Innovate UK & University of Greenwich

 

February

22/02

Breaking Big

Business Doctors (1st  of 4 part series into the summer)

 

March

07/03

The Right Model for Your Business (1st of 4 part scale-up series into April)

Smart Support

16/03

Start up workshop part 1

Kent Foundation

19/03

Kent Investors Network judgement panel

Kent Investors’ Network

 

Time Management

Business Doctors

23/03

Start-up workshop part 2

Kent Foundation

27/03

Marketing for Growth

Pro-actions

 

April

10/04

Protecting & Growing Your Business

Peninsula

16/04

HR: Getting on with it

Outset UK

17/04

The Magic of Social Media

The Business Terrace networker

23/04

Making a Success of Brexit in Kent & Medway: The Role of the SME

Canterbury Christchurch University

 

 

Photographs of The Business Terrace, events and office-space

 

  

 

 

 

 

 

 

 

 

 

 

 

Start-up workshops with Kent Foundation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

November 2016 – The Entrepreneur’s Journey

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

July 2017 – 2nd Anniversary Celebrations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

New Accelerator space – 5 new offices for growing tenants, opened October 1st 2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

November 2017 – Fighting Fit For Your Business

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2018 Snow – The Terrace remained open for Business every day.