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Less than three years’ supply of office space on South Coast


There is a lack of office stock in the South Coast market, in particular, of grade A accommodation, according to office market pulse Q3 2015. A number of development sites that were allocated for offices have now either converted to alternative uses or are subject to planning applications for change of use and this looks set to continue.


Andrew Hodgkinson, director of South Coast office agency for Lambert Smith Hampton (LSH), commented: “We now have less than three years’ supply of office space along the South Coast. With availability continuing to fall and with limited new development in the pipeline, the choice for businesses is narrowing. As a result, rents are on the rise and incentives offered to tenants are reducing.“


These factors are leading towards a situation where speculative development is being stimulated in prime locations such as Southampton Science Park. This is a speculative building of 30,600 sq ft which has been driven by high occupancy on the site and excellent fundamentals of location, amenity, parking and connectivity.


Take-up increases to 58% above the 10- year quarterly average • Take-up for Q3 was 149,800 sq ft – 58% higher than the 10-year average (94,704 sq ft)


• The combined take-up for the first three quarters of 2015 has already surpassed the take-up for the whole of 2014 and LSH anticipates the 2015 total to pass 500,000 sq ft for the first time since 2008.


There was a fairly even split of take-up between city centre and out of town and notably, the average transaction size rose to approximately 6,800 sq ft from 5,250 sq ft in H1 of 2015. Perhaps highlighting the lack of supply and improving demand, office buildings along the M27 corridor that have been vacant for some time are now fully let.


Enquiry levels fall across the board Following a consistent level of enquiries in H1, there has been a decline in Q3, not just in one specific size range but across all.


Q1 saw 52 new enquiries, Q2 saw an increase at 86 and then there has been a fall in Q3 to 43.


Despite this, Q3 enquiries remain above the average quarterly enquiry levels of the past two years.


Prime rents remain static but show the potential to increase • Rents of £19.00 per sq ft have been achieved in both the city centre and out of town markets


• Quoting rents now ahead of this and as high as £21.50 per sq ft at Gunwharf Quays, Portsmouth.


The last time that rents in the city were £21.50 per sq ft was in 2007/8. Looking back over the past 10 years, out-of-town rents peaked at just £20 per sq ft. It is expected that rents will continue to see growth at around 3% per annum in city centre markets and around 1.5% per annum in the out of town markets.


Supply falls to below three-years’ worth • Office supply has fallen to 1.219 million sq ft in Q3 2015


• This equates to less than three years supply of offices along the South Coast.


With continued strong take-up figures, LSH expects a further fall in office supply and, in particular, in the supply of prime office accommodation.


Investment overview Q3 has retained momentum with a number of office investment sales completing and further


Significant transactions Property


Solvay Premises, Southampton


Spectrum, Fareham


Charlotte Place, Southampton


THE BUSINESS MAGAZINE – SOLENT & SOUTH CENTRAL – DECEMBER 15/JANUARY 16 11,723 McAleer & Rushe


Berryman Lace Mawer


10-year lease www.businessmag.co.uk


Size (sq ft) Vendor/ Landlord


30,691


63 St Marys Street, 13,890 Southampton


13,246


1600 Parkway Spinnaker House, 13,239


Confidential Confidential Craigard Tenant/


Purchaser Confidential


Confidential BMT Horatio Properties Wartsila Deal info Freehold sale


for development Freehold sale


for development 10-year lease


10-year lease


new opportunities being brought to market, including: • Link 1 , Link 2 and Link 414, Eastleigh, with a quoting price of £12.85 million, reflecting a net initial yield of 8.22%


• 7-12 Manor Court, Segensworth, with an exchange price of £1.41m, reflecting a net initial yield of 7.21%


• Ivy House, East Sussex, seeking offers in excess of £3.57m, reflecting a net initial yield of 8%


• Rosalind House, Basingstoke, quoting £3m, reflecting a net initial yield of 12.48%.


Key investment transactions • 80,857 sq ft Charlotte Place, Southampton, was sold by McAleer & Rushe to Columbia Threadneedle for £15.5m, reflecting a net initial yield of circa 7.75%.


• 4500 Parkway, Solent Business Park, Southampton, was sold by Draco Property to Columbia Threadneedle for £9.7m, reflecting a net initial yield of 7.5%.


• Vanbrugh and Jellico House, Botleigh Grange Business Park, were sold by Aberdeen Asset Management to Northwood for £9m, reflecting a net initial yield of 9.02%.


• Ailsa, 3 Turnberry House, Solent Business Park, Fareham, was sold by Craigard Investments to a private investor for £1.19m, reflecting a net initial yield of 9.58%.


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