Offices take first steps towards recovery
Lambert Smith Hampton has been busy collating data for the UK market for office space to buy and for let, and says the market took its first steps towards recovery after take-up reached 5.5m sq ft in the first quarter of this year.
LSH says in its new National Office Report 2010 that Central London office space has continued to lead the way, accounting for nearly 62% of the market’s activity in Q1 after transacting 3.4m sq ft – the highest quarterly take-up in this region in five years and more than three times the amount taken up in the first quarter of 2009.
Tony Fisher, national head of LSH’s office agency, said: “Central London is expected to continue to dominate take-up across the UK, before the recovery spreads out to the provincial office markets during the next 12 to 18 months.”
Nearly 48% of all take-up was for Grade A space, but LSH points out that with only 22% of available office space on the market being Grade A – 25% of which is in Central London – this imbalance between supply and demand could spell trouble ahead, particularly given the severe lack of development that took place throughout 2009.
Looking at availability across the major UK office markets, LSH says availability in the South East is the highest at 17.1%. Excluding Central London, the North and South West follow, with availability of 15.9%. On average, availability in key locations was 12.7%, the report says, up from 11% at the end of 2008.
Nick Lloyd, head of capital markets at LSH, said: “Despite any immediate prospect of rental growth, there is now strong demand for prime product in the major metropolitan cities and established locations such as the Thames Valley.”
LSH has calculated an activity ratio for each of the 37 locations in the report, looking at average 10-year take-up rates and total stock of floor space. The three locations that stand out above the national average of 4.6% are Bristol, Cambridge and Newcastle.
Tony Fisher commented: “Bristol and Newcastle’s office markets have been sustained over the past decade by occupational demand from the public sector. Cambridge’s buoyancy is as a result of an influx of biotech business and the growth of science parks surrounding the university.”
He concluded: “The market will continue to recover as long as vacant second-hand office space is refurbished to meet the requirements of the next generation of occupiers, rather than allowing the market to stall while brand new Grade A space is being constructed.”
