focus on Reading 21


Reading town centre: A sea change for the office market?


Nick Coote, head of LSH’s Thames Valley offices, looks at the current drivers of office demand and how Reading town centre’s office market is preparing for the future


In Lambert Smith Hampton’s (LSH’s) latest research, Office Market Review 2013, the report highlights how office employment levels have shown a marked increase over the past year and how, on balance, we can be more optimistic on GDP growth going forward. At a regional level, enquiries for Thames Valley office space in Q1 2013 rose by 39% compared to any quarter in 2012 – is this the start of the office market sea change we’ve all been waiting for?


Lease events and modern working trends driving Thames Valley take-up


There are three drivers to office space demand: the macro-economic performance and outlook, lease events, and structural changes to the way offices are used.


During the past year 75% of Thames Valley office take-up can be traced back to a lease event, such as a lease end or break. In Reading, since the beginning of the year we have also seen an increase in expansion-driven demand as well as inward investment from outside of the town.


Increasingly, office occupiers are also seeking the ultimate in ‘modern workplaces’. This relates to an office environment based on an open plan layout (under the mantra of ‘shared space’ not ‘own space’). There will be very few private offices, but there will be meeting rooms and breakout areas; occupiers need their teams to communicate and collaborate, not operate in silos.


Reading town centre: the statistics


Available Grade A office space in Reading town centre currently stands at 316,260 sq ft, of which 70,000 sq ft is known to be under offer. A further 100,000 sq ft of serious corporate occupier enquiries are also in the market, with a strong preference towards being as close to the station as possible.


Furthermore, average long-term annual take-up of offices in Reading town centre is 172,000 sq ft. Given that we expect two of the town’s major office schemes – One Reading Central and Apex Plaza – to be fully let by the middle of the year, it is clear that we are heading towards a supply issue unless new schemes are brought forward.


Recycling office buildings


The challenge for Reading is that there are no new office developments underway or


THE BUSINESS MAGAZINE – THAMES VALLEY – MAY 2013 Reading Bridge office building


anticipated. A lot of the high-profile proposed new office development is of such a scale that its deliverability is challenging in a risk-adverse funding world. It may accommodate strategic larger scale and longer-term requirements via pre-lets, but it is unlikely to feed the general market with new, quality supply any time soon. Such large scale office development also has a time lag from start to completion of two to three years, so even if there was a start on site today it wouldn’t produce product until 2015/16.


There is therefore going to be an awkward gap in the supply chain, with the only way of filling this gap, in the short term, being to recycle existing buildings through via comprehensive refurbishment programmes. Thankfully these are faster in delivery than wholesale new development.


Reading refurbishments underway to fill gap in the market


There are three significant projects that have either just completed, are underway or about to start in Reading town centre:


Totalling 51,780 sq ft and with floorplates of 10,300 sq ft, Phoenix House is now the closest office building (at 100m) to the new station. Its refurbishment by owners Ediston Properties and Europa Capital has just been completed, with the top floor already under offer at £28.50 per sq ft.


Refurbishment of Abbey Gardens will complete shortly, with the 77,755 sq ft office building offering floorplates from 10,335 sq ft. Quoting rents here are £28.50 sq ft.


Reading Bridge has recently been purchased and the new owners are about to deliver a major overhaul to this iconic Reading office


www.businessmag.co.uk


building by refurbishing 92,000 sq ft on 9 floors. This will deliver floorplates from 11,825 sq ft, as well as adding significant amenity to the building in the form of a new ground floor occupier cafe, a conference room and shower facilities.


Infrastructure improvements promise bright future for Reading


Wrenbridge and Lumina, the new owners of Reading Bridge, were attracted to the investment by the strength of Reading’s town centre office market, and were driven by the impact of the station upgrade which brings a station entrance very close to the building. The forthcoming electrification of the rail service at Reading, and the direct future rail service to Heathrow Airport in 2018/20, will have a profoundly positive impact on office demand in Berkshire’s most influential office centre.


Details: Nick Coote ncoote@lsh.co.uk 0118-9598855


To download LSH’s latest office research, Office Market Review 2013, go to www.lsh.co.uk


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