Occupiers in the driving seat on business parks
Take-up and construction activity on the UK’s business parks during the first half of 2010 was the lowest in the 14-year history of GVA Grimley’s Business Parks Review. The review, which monitors the supply and demand of office space on business parks across the country, shows that availability rose 11% during H1 2010 with an extra 1.5m sq ft taking the total available floorspace at the end of the first half to 16.3m sq ft. The overall implied vacancy rate reached 17%.
Prime rents remained static or continued to slide during the first half of 2010 – although there were a few exceptions, where rents actually rose. The fall in rents since 2008 appears to have been sharpest in the South East, with more moderate declines in other regions. In the North East, Yorkshire and Humberside rents have remained steady – although once incentives are taken into account, net effective rents have fallen here too.
The trend of declining rents over the past year now appears to be slowing, GVA Grimley says, and positive rental growth is expected to make a comeback in 2011, taking its cue from the current strength in the market for office space to let in central London.
“While this has undoubtedly been a challenging time for developers and landlords, office occupiers continue to find themselves in a strengthening position in lease negotiations. Incentives have remained generous by historical standards, especially the length of rent-free periods,” the group noted.
With public-sector demand curtailed, prospects for business parks will largely depend on the private sector. GVA Grimley notes the government has pledged to increase support to many of the business sectors that typically locate on business parks, which it says is particularly encouraging for the Cambridge and Thames Valley areas.
