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In its annual Thames Valley Office Market report, Lambert Smith Hampton says the region is recovering from its 2009 low, with office take-up in 2010 totalling nearly 2m sq ft and this year continuing in a similarly positive tone, with 700,000 sq ft of take-up in the first quarter alone.

Nick Coote, head of LSH’s Thames Valley offices, says: “This is not only a marked improvement from the 2009 low, but an indication of market confidence returning to 2008 levels when 2.7m sq ft of take-up was recorded. These demand trends over the last three years suggest that the recovery curve is not the ‘double dip’ that the industry feared, but instead the steady volume of take-up implies a more classical recovery.”

Total office stock in the Thames Valley area is just over 64m sq ft, with current availability at 18% or 11.3m sq ft. LSH notes that office supply has remained relatively flat over the past year, with limited appetite for speculative development. Landlords are being challenged to refurbish existing stock or find alternative uses for their properties. The dominant drivers for occupiers are lease breaks and ends – companies are seeking to take advantage of these lease events to acquire space with larger floor plates, closer proximity to transport hubs and better environmental credentials, the firm notes.

“Over the next 12 months, as increased demand continues, we anticipate that market supply issues (where there are shortages of quality stock) will become exposed in some Thames Valley centres. This may see increases in rents, and potential frustration from occupiers seeking quality solutions in specific locations. The challenge for landlords will be providing the quality product demanded by occupiers, in the right locations, and restoring value to newly vacated stock,” LSH says.

Development Securities is going into partnership with S Harrison Developments to develop the Friarsgate Shopping Centre in Lichfield.

The listed company announced today that the 50:50 partnership would develop the retail-led scheme encompassing around 395,000 sq ft, which will also include hotel, cinema, office and residential uses as well as multi-storey parking, and which is due for practical completion in 2014.

Lichfield District Council has given planning consent to the scheme, which Development Securities says will provide “significant new prime retail space within the city”. The company noted that tenant interest was already strong, given the current lack of modern retail space in Lichfield. The two partners are in early talks with several occupiers, and are seeking a funding partner for the development.

David Clancy, director at S Harrison Developments, said investors were showing growing interest in prime schemes, while retailers with currently limited opportunities were keen to be represented in prime shopping centres such as Friarsgate.

More today on Central London office space, this time from Capita Symonds, which says its second-quarter survey of the market shows lower activity levels, reflecting the slower world economy. The second quarter of 2011 again saw take-up of Central London offices below the historic quarterly average of 3m sq ft, for the second consecutive quarter, the firm notes.

Take-up of available office space in the City was particularly weak at 605,000 sq ft, down 22% from the previous quarter and 36% lower year-on-year. In the West End the market was somewhat stronger but take-up was still 9% below the Q1 level at 722,000 sq ft and 35% lower year-on-year.

Alan Dornford, director – markets at Capita Symonds, said that it was too early for this to be described as a trend, but that it was clear that businesses were staying put and that the office market was “biding its time”. The prevailing caution in boardrooms across all sectors meant that businesses were reluctant to consider moving, investing, or recruiting additional staff.

Capita Symonds notes that occupiers have spent the past two years improving their space and making the most of incentives. But as supply has reduced and incentives have become smaller, businesses now have fewer options when considering a move “and the financial case isn’t necessarily as compelling as it once was”.

“The market is therefore now much more dependent on growth in the economy – new businesses coming into London and existing businesses adding more staff,” the firm points out.

Despite the uncertain short-term outlook for growth, the office market in Central London is still viewed as a safe haven for investors, Capita Symonds says, noting that recent Morgan McKinley data shows “a reasonably positive employment picture” in the City with more than 5,000 job vacancies compared with just 2,000 at the start of 2009. “This is further supported by the very limited amount of Grade A space in the pipeline – just 1.3m sq ft is scheduled for completion in the City in 2011 and 380,000 sq ft in the West End”, notes Andrew Mercer, director – investment at Capita Symonds.

Looking further ahead, there is just 640,000 sq ft of newly developed space due for completion in 2012 in the core Central London markets of City, Midtown and the West End, the firm points out. No office space is under construction at all in some central areas, such as the City Fringe and Docklands. “Outside this core the only substantial completion scheduled for 2012 is the Shard where 586,000 sq ft is available,” Mr. Mercer continued.

Once new supply does come onto the market from 2014, rents are forecast to cool somewhat, but in the meantime the scarcity of Grade A space is expected to see a continued “faltering, but upward” trend. (See CBRE’s latest Monthly Index for more on Central London office rental values.) Talk of a £100 per sq ft rent in the West End now looks a little premature, says Alan Dornford, with comparatively few rents achieved so far above £70 per sq ft. City rents are currently around £55 per sq ft, which is about 4% higher than at the start of the year.

June was a largely flat month for UK commercial property markets, according to the Monthly Index from CBRE. The overall capital growth of 0.2% and total returns of 0.7% last month were in line with those recorded in May, and most sub-markets in June saw values flat month-on-month or under slight downward pressure, the firm says.

The exceptions were the markets for Central London offices and retail warehouses, where growth in rental values drove a continued buoyant performance. Returns for office space in Central London reached 1.4% for the month, with retail warehouses producing returns of 0.7%. The strong rental growth of 0.5% in Central London offices also helped to offset falls in rental values in nearly all other sub-sectors, CBRE noted.

David Wylie, head of economics and forecasting at CBRE, said the wider market beyond the Central London offices subsector appeared to be lacking momentum, with transaction volumes down and occupier markets showing signs of renewed stress.

Overall office returns of 1.0% in June were double the 0.5% rate for the retail and industrial sectors. But within the offices sector the strong returns in Central London stood in contrast to the 0.3% returns for Outer London/M25 and 0.5% for the rest of the UK. Within the retail sector, shopping centre returns were also relatively strong at 0.6% while returns for high street shops fell to 0.3% following a 0.2% correction in values, the firm noted.

Property Week reports that Canary Wharf Group is the frontrunner to develop the Shell Centre on London’s South Bank into residential and office space. The group has financial backing from Qatar and is understood to be Shell’s preferred development partner for the scheme.

The famous Shell tower from the 1950s would be kept under the proposals while the three other buildings on the 5.25-acre site would be demolished, with 1.5m to 2.5m sq ft of space constructed on the site, split roughly half-and-half between residential and office space. The first phase would be completed by 2015-2016 and the final scheme is likely to be worth £1bn-£2bn, Property Week says.

The Canary Wharf Group-Qatar joint venture is in advanced talks to buy the site for about £300m, Property Week notes, but is not yet in exclusive talks. It adds that other parties that had sought to buy the property were Development Securities, with Carlyle; Chelsfield, with London & Regional; and CIT. Shell, which agreed a deal last year to move its staff to 40 Bank Street in Canary Wharf (owned by Canary Wharf Group) while the development takes place, is being advised by CBRE and Rothschild.

DTZ today reported a pre-tax loss before exceptional items of £0.6m for the year to 30 April, compared with a profit on the same basis of £3.0m the previous year. It said it was disappointed with the results but noted that the second half of its financial year had been stronger, and that action taken during H2 had built momentum leading to a full-year performance ahead of revised market expectations.

DTZ said that “varying trading conditions” across its group activities had reduced revenue to £341.3m from £356m the previous year. The group, which is currently the subject of takeover talks, said net debt at the end of April had been cut to £47.5m from £80.1m at the end of October 2010.

Lower levels of activity in the UK led to a fall in revenue to £128.3m from £145.7m the previous year, with pre-tax profit before exceptionals declining to £3.1m from £8.7m. DTZ’s Asia-Pacific operations performed well, with revenue up 8% to £106.3m and a pre-tax profit before exceptionals of £8.8m (£8.7m). The CEMEA business returned to a profit of £2.4m from the previous year’s £3.3m loss. The investment and asset management operations grew strongly during the year with revenues up 18.8% to £16.4m from £13.8m.

Group chief executive Paul Idzik said group-revenue per director had increased 13.5%, “reflecting the further improvements to our cost structure, investment in talent, and the continued strengthening of client relationships across the group”.

“Reversing the trend of revenue decline and achieving profitable organic growth now have to happen for DTZ to deliver improved financial performance. While the prevailing mood remains one of caution, I believe the group is on the right path and am confident we will achieve this goal,” he added.

Rent levels for available office space in the UK are rising, says Jones Lang LaSalle. While occupiers can still obtain good incentives in some regional centres, the window of opportunity is expected to close as the lack of speculative new development means that supply is set to reduce further overall.

The firm’s latest research into the sector shows that more markets are recording higher achievable office rents (the highest likely to be achieved in each location). In the year since March 2010, 26% of the centres it monitors have seen an increase in achievable office rents. This compares with 8% of centres in 2010 that experienced rental growth, JLL says. “Office rents have stabilised in over half of the property markets analysed, including the major regional centres of Leeds and Liverpool, where levels have remained unchanged since March 2010,” the firm adds.

Year-on-year office rental growth was strongest in the year since March 2010 in Glasgow (3.8%), Birmingham (3.6%) and Manchester (1.8%). This year, Jones Lang LaSalle expects to see an average of 0.7% rental growth in prime office rents in Birmingham, Manchester, Leeds, Edinburgh, Glasgow and the Western Corridor region, but it points out that this is likely to be the result of reduced Grade A space available rather than a rebound in occupier demand.

Incentives offered by landlords have stabilised in about 35% of the markets that JLL covers in its research, and have started to harden in some locations. Average rent-free periods in Edinburgh, Newcastle, Bristol and Cambridge have fallen, amongst others, the firm says. But occupiers can still enjoy “substantial” cost savings in many regional centres, with year-on-year incentives for available office space currently the most generous in Doncaster, Middlesbrough and Hull. Rent-free periods are 24 months or more in about half of the centres the firm monitors. In the North West they average around 30 months.

James Finnis, director in the firm’s National Offices team, said: “Looking at current achievable rental levels, a number of UK regional markets, including Staines, Slough, Uxbridge and Norwich, still remain some way below their long-term average.  We anticipate, because of this, that these locations could represent opportunities for further potential growth stories over the short term.”

The Department of Energy & Climate Change (DECC) has decided to keep the CRC Energy Efficiency Scheme, despite calls for it to be axed in favour of an increased Climate Change Levy. After consultation with business, the public sector and regulators regarding the CRC Energy Efficiency Scheme, the government says it will simplify both the CRC and Climate Change Agreements (CCAs), with an emphasis on removing the overlaps between the schemes and streamlining each one.

Many large public and private-sector organisations have had to report their energy use for the first time during the past year under the CRC scheme. The proposals, on which the government plans formally to consult next year, include a continuation of fixed-price sales into the second phase of the scheme, which it says would provide greater certainty for businesses. Prices for carbon allowances were previously to have been set by the market from 2014, but these proposals would see fixed prices continue until 2019.

“Our proposals will provide business with greater flexibility by allowing organisations to participate as natural business units. They will also reduce the administrative burden; for example by reducing the number of the fuels which are subject to the scheme from 29 to four. We will also reduce the complexity of the scheme by removing the 90% rule and CCA exemption rules, whilst achieving broadly the same outcomes and remove any overlap between schemes at registration. In particular, businesses covered entirely by CCAs will not need to register and we will no longer require EU ETS installations to purchase allowances for electricity supplies,” said Climate Change Minister Greg Barker in a written ministerial statement.

CB Richard Ellis says the changes to the CRC are only minor technical amendments. It notes that the government’s decision last autumn to remove the revenue recycling mechanism “saw the scheme transformed overnight into what is widely regarded as an overly complex ‘carbon tax’”. The firm also says that with consultations not due to start until early next year, uncertainty regarding the second phase will continue.

As the market waits for Saint George Participations (SGP) to make an offer for the remainder of DTZ that it does not already own, a report in today’s Telegraph appears to be cranking up the pressure on the French group to act, with talk of Australian support services group UGL emerging as a rival bidder.

The paper also reports a claim that SGP, the 55% shareholder in DTZ, is preventing other interested parties from gaining access to the data room and entering into detailed talks.

SGP wants to take the publicly listed DTZ private and merge it with BNP Paribas Real Estate. It is understood to be working on a bid of 60p per share, or £160m. DTZ first announced it had received early-stage offer approaches in May. It confirmed in June that it was “continuing to review approaches of interest” in addition to the discussions with SGP. Shares in DTZ closed at 44.5p at the end of last week, valuing it at £120m.

DTZ is due on Thursday to report full-year results for the 12 months to the end of April. The consensus forecast among analysts is for a pre-tax loss of around £2m on revenues of about £350m, the Telegraph says.

Jones Lang LaSalle says industrial occupiers across the EMEA region are continuing to grow in confidence, which is starting to lead to new flows of corporate investment. The firm says occupiers are still mainly focused on space upgrades and network optimisation strategies, which is sustaining demand for modern industrial space, but also adding to the churn of older, secondhand stock.

JLL’s new research into conditions for industrial occupiers in the EMEA region shows that the returning confidence among occupiers and new investment flows are having a positive influence on activity levels within the property market, but the firm says that expansion strategies for industrial occupiers are only gradually starting to return to the corporate agenda.

Vincent Lottefier, head of JLL’s Corporate Solutions EMEA team, expects to see continued moderate growth in demand in selected markets, particularly in Western Europe, compared with 2010. New sectors such as e-retailing and ‘new energy’ are expected to contribute to future demand for industrial property across the EMEA region.

But there are still some downside risks. There is a shortage of modern industrial property, as new completions and the supply pipeline are at historic lows. JLL forecasts that completions in Western Europe over the next year will be below the five-year annual average, and notes that most future supply is pre-let or built-to-suit. This reduced choice for occupiers and the strong competition for space are expected to lead to reduced incentives for occupiers and rising rents in most European markets by the end of this year, the firm adds.