The South East


In My View by Guy Parkes, Partner, Vail Williams LLP Commercial Agent


Reading revelling in office market revival There is a real sense of having turned a corner in the Reading office market which has experienced the largest number of transactions than any other town in the region, and the largest square footage let post-pandemic.


Organisations have undertaken their strategy reviews defining what space they need going forward, and now have their sights focused on Reading, reaffirming the town as the business capital of the Thames Valley region.


Occupiers have committed to a hybrid future here and the continued flight to office quality has seen most super-prime and Grade A+ stock in Reading let to these early adopters of a return to the workplace. In some instances, Reading occupiers are now having to compromise on more competitively priced stock as the super prime supply dwindles. However, they are reinvesting the capital saved into high-end fit-outs and the creation of attractive office environments for their people.


There is still the opportunity for landlords to invest in super prime office space in Reading through extensive refurbishment projects. This is ideal for offices in already buzzing and amenity rich areas, mainly in the town centre boasting car parking facilities or within close proximity to train travel.


Of course, the same is also true of business parks with good amenities, however office assets and associated environments without these benefits and those unable to build a vibrant community feel, continue to suffer and investment viability would remain a concern for landlords.


What’s hot Prime stock at Apex and Station Hill still leads the market in Reading, with rents hitting £55.00 psf+ at the latter. These bigger buildings which are being carved up to offer a range of suites with collaborative business lounges provide the highly activated space with hospitality services and events programmes that major occupiers like Pepsi and PwC who are moving to Station Hill really want.


Assets further away from Reading station which don’t boast quite the same level of quality are struggling to let. Some may be disposed of for residential development, subject to any Article 4 Directives being imposed by the local authority. Meanwhile others might be repurposed for industrial redevelopment where land is in short supply and high demand - such is the demand that industrial rents are outstripping secondary office rents in some cases.


Availability In broad terms, Reading has the largest overall supply which could holdback rental growth. 30% of existing offices in the town is Grade B stock, and the polarisation of rents between Grade A & B is growing. Secondary Grade B buildings have seen voids move out and incentives increase, to attract cost-conscious tenants.


This could see a significant portion of the Grade B office supply in Reading be repurposed for


28


alternative uses and we are engaged in a lot of options analyses in this area currently for landlords and investors seeking higher returns.


Most leasing activity has been around Grade A offices which represents only two years’ supply based on the 10-year average take up figures. In which case, we have seen headline rents continue to move upwards. £40 per sq ft is the new benchmark for existing stock.


Rents


Headline rents for super prime stock remain high across the board, but the existing office rental market is generally overpriced for some, and we have seen rents reduce in real terms.


There is now a two-tier market between existing and newly built offices which command higher rents, but this is not based on the inflation of recent years – rather, because of build cost inflation meaning that new builds need to be a step on in rental terms, to be viable. In the case of existing offices, landlords have been offering pre- fitted and furnished space to occupiers to remove any friction around undertaking an office move, and to underpin a higher headline rent for what is referred to as ‘plug and play’ space. Of the 29 office leasing transactions in Reading Town Centre this year, 27 were to tenants talking fully fitted space.


Landlords have been guessing what shape of fitout occupiers will want. However, most of these suites require further adaptation to the layout and finishes for incoming tenants. As a result, we are seeing more pre-let fitout discussions where the landlord engages a contractor and architect to collaborate with the tenant prior the space being built out.


This approach is considered a ‘win-win’ solution with the occupier benefitting from a bespoke fitout and the landlord saving on the cost of pre- deploying CapEx prior to a tenant coming in, not to mention saving time all round. Broadly speaking, Reading continues to enjoy a good level of office market activity, and we expect this to continue into 2025 as more quality stock comes to market here.


There is still a question mark over what organisations will need from their workplace in the future, and this is resulting in growing demand for shorter leases with 3–5-year break clauses. For the second year in a row, according to research by Hays Recruitment, there has been an increase in office attendance.


Whilst many companies are settling on a pattern of 2-3 days working in the workplace this looks like it may increase. In 2023 office attendance was 36% and this year it is running at 43%. Remote working has reduced from 43% to 39%. It therefore remains challenging for occupiers to properly plan for their requirements and for investors and developers to know what to build.


Therefore, flexibility of lease length and the offer of swing space and business lounges in office buildings, remain a key feature of the office letting market. We are even seeing padel courts appear in some offices, to lure occupiers in! Long live the workplace.


Progress on Hazeley Enterprise Park Redevelopment


Hazeley Group is pleased to provide a progress update on Hazeley Enterprise Park, located at Northfields Farm, Twyford. This transformation is advancing according to plan and offers new and enticing opportunities for enterprise-level businesses looking to establish a base in the area.


As part of the continued work to revitalise the site, tree and ecological works are now nearing completion. These efforts align closely with the park’s commitment to environmental stewardship, and we are working alongside ecology specialists to ensure all activity is within the agreed planning terms.


In addition, this week marked the start of the demolition phase. The former Royal Mail distribution centre and several smaller workshops are being removed to make way for modern, energy- efficient commercial spaces. This demolition work is scheduled for completion by mid-November, a significant milestone in the site’s transformation.


As we progress, interest in the development has been promising. There has been substantial demand from businesses looking to reserve units off-plan, and negotiations are underway with a number of these organisations. This level of early interest highlights the value of this development as a premier commercial location within the South Downs National Park.


Another key element of the project is the community-focused hub, which will


feature


a café and event space. We’re pleased to report strong interest from local businesses keen to operate the hub café, and discussions with potential partners are ongoing. We are committed to ensuring this space reflects the community’s needs and becomes a vibrant focal point for both tenants and the wider public.


We have also launched our Community Fund. This initiative will support local projects and causes, reinforcing our commitment to making a positive impact in the area.


As we move forward, we expect to appoint a contractor in early November to lead the build of the first phase. This phase includes modern commercial units that prioritise sustainability, with high levels of energy efficiency, photovoltaic panels and EV charging points as standard, meeting the needs of today’s environmentally conscious businesses.


Hazeley Group invites enterprise-level businesses to consider Hazeley Enterprise Park for their next chapter of growth. With excellent transport links, stunning natural surroundings, and a range of sustainable, customisable spaces, the park is set to become a premier destination for business within the South Downs.


COMMERCIAL PROPERTY MONTHLY 2024


Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20  |  Page 21  |  Page 22  |  Page 23  |  Page 24  |  Page 25  |  Page 26  |  Page 27  |  Page 28  |  Page 29  |  Page 30  |  Page 31  |  Page 32  |  Page 33  |  Page 34  |  Page 35  |  Page 36  |  Page 37  |  Page 38  |  Page 39  |  Page 40  |  Page 41  |  Page 42  |  Page 43  |  Page 44  |  Page 45  |  Page 46  |  Page 47  |  Page 48  |  Page 49  |  Page 50  |  Page 51  |  Page 52  |  Page 53  |  Page 54  |  Page 55  |  Page 56  |  Page 57  |  Page 58  |  Page 59  |  Page 60  |  Page 61  |  Page 62  |  Page 63  |  Page 64  |  Page 65  |  Page 66  |  Page 67  |  Page 68  |  Page 69  |  Page 70  |  Page 71  |  Page 72  |  Page 73  |  Page 74  |  Page 75  |  Page 76  |  Page 77  |  Page 78  |  Page 79  |  Page 80  |  Page 81  |  Page 82