Cabinet Agenda Item 173
Subject: Future of New England House
Date of meeting: Thursday, 20 March 2025
Report of: Cabinet Member for Finance and City Regeneration
Contact Officer: Name: Max Woodford
Tel: 01273 291666
Email: max.woodford@brighton-hove.gov.uk
Ward(s) affected: West Hill & North Laine;
Key Decision: Yes
Reason(s) Key: Expenditure which is, or the making of savings which are, significant having regard to the expenditure of the City Council’s budget, namely above £1,000,000.
1.1 New England House is a council owned industrial building which is tenanted by multiple commercial tenants primarily in the creative, cultural and digital industries which are important sectors for the city’s economy. Over several years, underinvestment in the building has resulted in a number of problems with the building fabric – in particular these have created fire risks which the council as landlord must now take urgent measures to rectify. This report describes options for the future of New England House following the identification of those serious fire safety issues and seeks approval to further develop those options to refurbish or replace the building.
1.2 Due to fire risks present in the building, this report recommends that vacant possession of New England House is secured to be able to undertake a full refurbishment or redevelopment of the site. Tenants should be notified of Cabinet’s decision six months in advance of the target date and Tenants will individually be given written notice in accordance with the terms of their leases. The report describes how tenants will be supported to find alternative accommodation.
1.3 This proposal accords with the Council Plan 2023 – 2027, specifically:
Outcome 1: A city to be proud of
1. Develop Brighton & Hove as a place where people want to live, work and learn.
2. Grow a diverse and sustainable city economy.
2.1 Cabinet agrees that the Council seek to secure vacant possession of New England House with a target date of 30 September 2025 in view of the need for the building to comply with all current fire safety standards.
2.2 Cabinet notes that a further report will be brought forward in Summer 2025 asking for approval of a recommendation for the future of New England House.
Fire safety issues
3.1 New England House is an eight storey, council owned industrial building used by multiple commercial tenants primarily within the creative, cultural and digital industries. The building has been due a major refurbishment for several years and plans were being prepared to take this forward.
3.2 Extensive surveys have established that the building currently has fire safety failings which include inadequate fire protection of the floor slabs; extensively compromised compartmentation throughout the building including the façade which is beyond its useful lifespan; no fire protection of external staircases; insufficient fire detection and firefighting provisions (given the current state of building); no provision for the evacuation of disabled people; and an incoming electrical supply beyond its useful lifespan which is a potential fire risk. Major works are required for the building to be brought to compliance with safety standards.
3.3 It was necessary to undertake an emergency closure of the building in November 2024 to put fire safety control measures in place as the risk of keeping the building open was considered too high without them.
3.4 This report is recommending that, in view of the scale of the works needed, it is necessary to secure vacant position of the building in order to either prepare for a full refurbishment which would comprehensively mitigate fire risks, or for a redevelopment of a building which is fit for purpose, in accordance with current safety standards.
3.5 An internal audit is reviewing the decision making up to the temporary closure of New England House in November 2024. This will help ensure lessons are learned, and will be reported to Audit, Standards & General Purposes Committee.
3.6 The council has commissioned a report summarising the fire safety issues, authored by an independent consultant fire engineer. This is appended at Appendix 1 [New England House Short Term Mitigation Report, Firenta, 11/11/2024]. This report sets out the basis upon which it is considered that in its current state, the building is an intolerable fire risk. The report recommended immediate short-term control measures to mitigate this risk.
3.7 In accordance with those recommendations control measures have been implemented to maintain business continuity over a short period. These include fire wardens on-site 24/7 who proactively identify fire risks and incidents, are trained to tackle a fire if safe to do so and will lead an evacuation of the building. LPS gas has been removed from the building or is stored compliantly, and the storage and charging of bicycle and scooter batteries has been prohibited. These measures are intended to mitigate fire risks and enable the building to remain open for a short period whilst it is vacated.
3.8 The New England House Short Term Mitigation Report [Appendix 1] describes the risks in the building and limitations of keeping the building open beyond a short period, without fully resolving the key failings in the building.
3.9 Implementing short-term control measures must be followed by major works to resolve the building’s failings either via a refurbishment of the building or via demolition and redevelopment. In both cases the existing tenants would need to move out of the building.
3.10 The Council has considered whether it would be possible to conduct the works required with tenants remaining in the building given the desire of many tenants to remain in the building, and the wish of the Council to continue to support the industries represented. As detailed below the evaluation of the scale of the works required has concluded that it is not a realistic option to achieve this with tenants remaining in the building, if the building were to be refurbished. Thus, irrespective of whether the Council refurbishes or seeks to redevelop the site, regrettably, the need for existing tenants to move out of the building is unavoidable.
Reasons for recommendation to empty the building
3.11 Undertaking a refurbishment of the building with existing tenants in place is considered unachievable. The works are estimated to take several years longer if the building remains occupied. The fire risks in the building remain until such works are completed to rectify the defects and emptying the building to undertake the works is therefore the safest option.
3.12 If tenants were to remain in the building while fire safety works were carried out, each tenant, including all their property and fittings, would need to relocate within the building while works are carried out to their unit. The façade of the building and all fire doors must be replaced, and repairs must be made to the ceilings and most internal walls. To do this, several tenants, potentially an entire floor, would need to relocate at the same time to carry out the works.
3.13 Recent experience undertaking limited fire mitigation works in occupied units presented issues with programming, obtaining the tenants’ consent to undertake works, and negotiations with tenants to relocate them both temporarily and permanently. The works were delayed, proved majorly disruptive for tenants, and took a lot of tenants’, the council’s and contractor’s time to agree and undertake. A much larger refurbishment project is expected to be unfeasible in relation to the complexity and resources required from the council, tenants, and contractor, to be able to deliver successfully. The project would be difficult to control, and the likelihood of significant programme and cost overruns would be very high.
3.14 The disruption of noise, vibration, access limitations and relocations are expected to lead to significant vacancies in the building, greatly limiting the benefits of keeping the building open and occupied, while also making it difficult to realise all the benefits of a refurbishment. These benefits include undertaking a deeper retrofit to extend the lifespan of the fire stopping measures and overall building, and resizing units to make them more lettable.
3.15 For these reasons it is considered that there is no realistic option to conduct the scale of the works required with tenants continuing to occupy the building.
Supporting tenants to relocate
3.16 A decision to empty the building will require tenants to relocate from the building and some tenants are already doing so. Tenants will be contacted individually regarding notice to leave their premises, in accordance with the terms of their tenancy.
3.17 A survey undertaken by tenants found the majority would prefer over six months to vacate (even where there is no entitlement to this under their tenancies), and they have asked the council to consider keeping the building open for at least twelve months to help them move. But it is not considered that it is a tolerable level of risk for the building to remain open for a further twelve months while the key failings remain unresolved, even with the current mitigation measures in place.
3.18 It is recognized that whilst six months may be suitable for some tenants to find alternative accommodation, it will be a challenging timescale for others. There is a lack of affordable light industrial workspace in the city, especially in the central area, and the tenants will be competing the limited space available. Not all tenants of New England House are expected to be able to find alternative accommodation in the centre of Brighton.
3.19 For some tenants, being located in the London Road, city centre area and close to Brighton Station is considered by them to be helpful to their businesses, and for many tenants the co-location of creative, cultural and digital businesses in New England House is important to the success of their business.
3.20 Space at New England House is let at comparatively lower rents than many other buildings in the city and it is recognised that there is a risk that many tenants will need to pay more for workspace elsewhere.
3.21 To assist with this a review of all council owned property, including surplus operational property, has been undertaken to identify properties with potential to provide alternative accommodation for tenants relocating from New England House. This includes properties that are not currently office, workshop, or light industrial use (for example schools) and several properties have been identified. If these premises can be made available, tenants will be notified of their availability as soon as possible.
3.22 To mitigate the impact upon tenants, the council will offer the following waivers to all tenants, to help them to move:
· Permit tenants to vacate earlier than their notice period.
· Require tenants to return units in a vacant, tidy safe and compliant order while waiving full dilapidations liability.
· Tenants will be given first refusal, on commercial terms, to return to a refurbished building or redevelopment.
New England House’s impact on the city’s economy
3.23 New England House is an important hub for the city’s creative, cultural and digital sectors and enables innovation and economic growth through its unique tenant mix. Light industrial commercial space in the city is extremely limited and New England House contributes a significant amount of space to the total stock.
3.24 The council wishes to ensure there is an economically sustainable provision of commercial workspace, including light industrial space at the New England House site supporting a diverse range of businesses which continues to foster the city’s creative, cultural and digital business sectors and offers space for makers to start up and grow.
3.25 Provision of affordable commercial space in the city centre is important to meeting the council and city’s needs and objectives as identified in the recent Brighton & Hove Employment Land Study 2024, Brighton & Hove Economic Plan 2024 to 2027 and Brighton Space to Grow report 2023.
3.26 The Brighton Space to Grow report 2023 highlights the importance of the creative and cultural sectors in the city. It describes the most pressing challenge faced by Brighton & Hove’s creatives, businesses and organisations as the limited availability of space, high prices and the lack of flexibility in lease arrangements.
3.27 The Space to Grow report uses New England House as a case study: “New England House is a great example of a place which is more than a sum of its parts — the high concentration of creatives supports innovation and has given rise to numerous collaborations. As a result, New England House has become an inconspicuous heart of creative production in Brighton & Hove. New delivery should learn from the success of New England House and seek similar qualities - affordable rates and clustering of creative businesses”.
3.28 The Brighton & Hove Employment Land Study 2024 identifies jobs in office and industrial sectors in Brighton & Hove are forecast to grow by 8% between 2023 and 2041. Approximately 87,000m2 of new office space and 56,386m2 of new industrial space will be required in the city over the period to 2041. To be able to meet the identified levels of need, it recommends protecting existing industrial space from redevelopment to other uses.
3.29 The Brighton & Hove Economic Plan 2024 to 2027 sets out a 10-year strategic vision guided by eight core imperatives. These include:
Capitalise on our digital competitive advantage: the city has a comparative advantage in digital sectors which are vital to economic growth. Barriers to the opportunity persist. There is still a lack of scale up within our micro-businesses, perpetuated by a shortage of space (especially within the city centre).
A world-leading creative destination worthy of the UK’s best small city: aspiring to have a creative economy that is sustainable, healthy, secure and thriving, rooted in our city. What makes us unique is our local people, talent, independence, entrepreneurialism and creative freelance economy, and driving additional economic and social value from this will be crucial to the city’s distinctiveness and economic competitiveness.
Options for the future of New England House
3.30 An initial options appraisal for the long-term future of New England House has been carried out. Six options have been considered to refurbish New England House or demolish and build a new commercial use building. A description of the options is included in Appendix 2.
3.31 A financial appraisal overview of the options is given in the below table:
|
Option name |
Investment* [£’000] |
Modelled Lifespan [years] |
NPV at end of lifespan* [subsidy/ (surplus)] [£’000] |
Year achieves surplus |
|
Refurbishment (empty building) |
31,672 |
20 |
(10,372) |
12 |
|
Refurbishment (while occupied) |
34,839 |
20 |
(10,687) |
14 |
|
Refurbishment (3 storey extension) |
52,403 |
30 |
(32,841) |
15 |
|
Small New Build |
60,287 |
50 |
(30,253) |
38 |
|
Med New Build |
82,818 |
50 |
(35,281) |
41 |
|
Large New Build |
105,421 |
50 |
(32,073) |
45 |
* Figures are based on stress test +10% cost and +10% rent
3.32 An average rental income of £15 per sq. ft (in 2024/25) is assumed as this is the current average rent at New England House. A 10% increase is still considered affordable and is used in the assumption for the above table. All options have been assessed on the existing use only, and new build options especially would benefit from consideration of a mixed-use scheme. All options considered achieve a surplus within their lifespan.
3.33 The option to refurbish while occupied would be expected to create a service pressure of up to £0.85m for 2025/26 and 2026/27 through loss of income, but this option is not considered realistic in the circumstances described above. All other options require emptying New England House, which would create a service pressure, through loss of income, of up to £1.2m for 2025/26 and 2026/27. The service pressures for 2026/27 will be built into the council’s Medium Term Financial Strategy to remove the income target whilst construction for refurbishment or redevelopment is underway and will also ensure future rents of the preferred option covers any required borrowing costs.
3.34 A fully developed options appraisal will consider different delivery strategies for both refurbishment and redevelopment including the council acting as developer and landlord or working in partnership with outside organisations to deliver the works and/or manage the building. It will also include mixed use new build options including housing, different types of commercial space and rent levels.
4.1 Do nothing– the situation in relation to fire safety in the building was evaluated as intolerable and control measures are already in place to mitigate risks in the event of fire. These control measures make the building safe to occupy at current levels for a short period of time but must be followed by closure or major works to address the fundamental deficits in the safety standards of the building. To rectify the deficiencies in the building it is considered necessary for tenants to relocate out of the building.
4.2 Disposal of the building – The investment and development market is currently very subdued with both investors and developers having difficulty securing funding. Under improved market conditions in the future, values may be higher. The estimated use value does not cover the investment costs to refurbish the building. The council has therefore been advised that the current market value of an occupied New England House, or with vacant possession is £0, and that both a fully refurbished building and a medium sized new build would, at current estimates, have a negative value as the investment would be more than the value of the asset after works have been completed.
4.3 Deliver light industrial use space in other locations in Brighton & Hove – Identify other sites across the city where commercial light industrial space could be built to replace New England House, freeing up the site for a mixed-use development with a high proportion of residential or fully residential use. This option requires further detailed analysis and consideration. This is expected to be a complicated and high-risk strategy, and the timescales do not fit with present need to undertake works to mitigate fire risk, or close New England House. The city does not have a lot of options for location of light industrial space. Further consideration of this option will be reported to Cabinet as part of the next stage of the options appraisal.
5.1 A Tenant Representative Group has been set up through which officers can share progress on fire safety measures and consult on project options. The minutes of each meeting are shared with all tenants. A single point of contact has been set up for tenants to contact the council in relation to New England House.
5.2 Individual meetings have been arranged with tenants to discuss the impact of fire safety mitigations, provide feedback on tenant’s fire risk assessments and answer any questions they have. In October 24, following letters to all tenants outlining the fire safety issues and proposed mitigation works, all tenants were invited to a meeting at New England House to discuss the fire risks and proposals. Following the temporary closure of New England House in November 24 a meeting was held for all tenants to describe why the need for closure and answer tenant’s questions.
5.3 The council’s Health & Safety team offered 50 tenants Occupancy Fire Risk Assessment training, which was held at Brighton Town Hall.
5.4 A full communication and consultation plan will be prepared to support further development of the options for the long-term future of the site. The intent of this consultation plan will be to ensure the project proceeds in collaboration with existing tenants and wider business representatives to deliver commercial workspace which meets the city’s current and future needs, and to implement a sustainable management strategy.
5.5 Local residents and businesses will also be invited to engage with a consultation process on the design proposals for a redevelopment of New England House if this option proceeds.
5.6 The project team will establish ongoing communication channels with local residents and businesses to ensure they understand what works are taking place, the likely impacts and disruptions. The project team will aim to minimise disruptions and give as much notice as possible wherever possible. It will work with local tenants and businesses to achieve this.
6.1 Giving notice to tenants in New England House will result in service pressures to the council from both lost rental incomes and from business rates liability as units become void. The annual rental income target for New England House is c£1.2m and the estimated annual impact of Business rates for the property is c£0.700m. NNDR reliefs are available to mitigate some of this business rates impact, but the level of relief available is dependent on future options of New England House. These pressures have not been included within the 2025/26 budget and will result in reported adverse variances of c£1.200m within the Council’s Monthly Budget Monitoring process for the 2025/26 financial year. Where all options are 3 years or greater in timescale to deliver either a full refurbishment or redevelopment of the site, recurrent service pressure funding will need be included within the Medium Term Financial Strategy to account for lost rental income over the period of the refurbishment/redevelopment. Rental income from the refurbished or redeveloped site would support the costs of borrowing in future years.
6.2 Any costs related to emptying the building and preparing detailed options appraisals will be funded from the existing capital budget for New England House Refurbishment. All initial options appraisals are resulting in surplus net present values at the end of their lifespans. The detailed options appraisals work will finalise the preferred method for cabinet to consider.
Name of finance officer consulted: John Lack Date consulted: 20/02/25
7.1 The Council has the general power of competence under section 1 of the Localism Act 2011 to do anything an individual may do subject to any statutory limitations. Further the Council has powers under Section 111 of the Local Government Act 1972 which, permits the Council to do anything which is calculated to facilitate, or is conducive or incidental to, the discharge of any of its functions. The recommendations in this report are in keeping with this power.
7.2 As the owner of the building the Council is legally responsible for ensuring that it complies with current safety standards. The interim measures taken to protect the safety of existing tenants whilst reducing risks to tenants in the event of a fire, and reducing the risk of fire occurring, which have allowed for ongoing occupation of the building are insufficient to achieve compliance. It is essential that the building is brought to compliance with all safety standards. As indicated in the report if refurbished this involves major works which cannot realistically be achieved with tenants present in the building.
7.3 Tenants will be entitled to notice in accordance with the terms of their tenancy.
Name of lawyer consulted: Siobhan Fry and Natasha Watson
8.1 The body of the report covers steps being taken to mitigate the significant fire safety risks associated with New England House. The report also covers potential risks in relation to impacts on businesses located within the building and the wider economy of the city through needing to empty the building.
9.1 Fire risks in relation to the evacuation of disabled people have been identified and addressed to ensure any disabled people known to be working in or visiting the building can be evacuated safely.
9.2 Refurbishment options have included the introduction of refuge points to improve safe evacuation of disabled people.
10.1 An initial assessment of the sustainability implications of refurbishing and redeveloping New England House have has been carried out. A future report presenting a detailed options appraisal will include quantitative whole life carbon emissions estimates.
11. Health and Wellbeing Implications:
11.1 The current fire risk situation in New England House and lack of certainty on the future of the building has created much stress and anxiety for tenants.
11.2 The change and disruption of emptying New England House may further negatively impact the health and wellbeing of people who work in the building and use services the tenants provide.
11.3 Helping tenants find alternative space may help reduce the stress of relocating.
11.4 The safety of tenants is at the core of the recommendations in view of the fundamental issues identified with the current safety of the building.
12. Conclusion
12.1 It is recommended that steps are put in place to start to emptying the building to achieve vacant possession with a target date of 30 September 2025 due to the existing fire related risks in the building and the need to undertake a full refurbishment or redevelopment of the site. Work will continue on the options for the future of the building with an aim to bring this back to Cabinet in Summer 2025 for decision.
Supporting Documentation
1. New England House Short Term Mitigation Report [Firenta, 11/11/2024]
2. New England House Options Report