48 property
Steady erosion of quality office space across the Thames Valley region
National commercial property consultancy, Lambert Smith Hampton (LSH), has published its annual Thames Valley Office Market Report, highlighting steady office take-up over the last two years which is resulting in shortages of quality office stock in certain centres
The market in numbers
The report, now in its fourth year, looks at the dominant commercial property trends over the last year, with detailed statistics and forecasts for 11 key centres in the region. Key sentiments include:
• Office stock in the region totals just over 64 million sq ft, with current availability standing at 11.9 million sq ft (as at Q2).
• Office demand is recovering from the 2009 low of 1.1m sq ft, with take-up in 2011 totalling just under 1.7m sq ft - a similar level to that recorded in 2010.
• The tone of 2012 to date suggests that we will see a comparable level of activity over the course of this year, with a number of large office requirements expected to fuel take-up figures.
• There continues to be limited appetite for speculative development, with only three new speculative schemes under construction in the 11 Thames Valley centres featured in the report. In the short/medium term, therefore, refurbished secondary space must fuel office supply in the region.
• Investment volume in the Thames Valley has significantly increased over the past year. Total investment in the region in 2011 is estimated at £1.03 billion - some £673 million higher than the previous 12 months.
Nick Coote, head of LSH’s Thames Valley team, commented: “The stable levels of take-up in 2010 and 2011 might be surprising to some, given the negative macroeconomic environment. However, this stability is reflective of the main driver of office demand: occupier lease events. These are date-driven rather than being indicative of the business and economic environment; if an occupier has a lease event looming, and has an opportunity to vacate dated offices, they will do so to improve business and occupational efficiency.”
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Coote added: “While letting velocity remains relatively slow, activity is focused on the better quality office stock. As a result, there is a steady erosion of quality office supply in the region, so we anticipate that market supply issues (where there are shortages of quality stock) will become increasingly exposed in some centres. This may lead to increases in rents, and potential frustration from occupiers seeking quality solutions in specific locations.”
However, with a high proportion of 25 year leases on late 1980s stock coming to an end between 2013 and 2016, there is the opportunity for some of these buildings to be recycled. This will create ‘new’ stock for the under-supplied centres, as consolidation and churn continues.
Infrastructure developments
The report also looks in detail at some of the future infrastructure developments in the region, with Crossrail set to transform the accessibility of the Thames Valley to the City, and the £850m works at Reading station promising major improvements. Furthermore, on July 17 the Government approved £500m of funding for the Western Rail Access to Heathrow (WRAtH) project – a direct rail link to Heathrow that will improve access to the airport for the whole western corridor.
Coote explained: “The WRAtH project, which is being spearheaded by the Thames Valley Berkshire Local Economic Partnership, is further fuel to the improvements in transport infrastructure. Reading, Maidenhead and Slough will all benefit from direct rail links, with 20% of the UK
THE BUSINESS MAGAZINE – THAMES VALLEY – SEPTEMBER 2012
The full report can be downloaded at
www.lsh.co.uk.
Details: Nick Coote
ncoote@lsh.co.uk 01189-598855
population expected to be within one interchange of Heathrow – meaning a much faster rail service from as far away as Cardiff, Exeter and Bournemouth.”
Thames Valley centres stand to benefit hugely from this latest infrastructure initiative, with direct trains to the airport making the region more accessible than ever to international occupiers and inward investment. Coote concluded: “The Thames Valley is a major growth corridor to the west of London, with the WRAtH plans helping to cement its appeal as a major national and international economic centre, connecting corporate occupiers to global business.”
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