Occupiers and investors flock to Thames Valley – Knight Frank
Knight Frank says the market for office space in the Thames Valley has continued to outperform the wider South East office market, with take-up of M4 corridor office space at 649,788 sq ft during the third quarter, up 44% from the previous quarter and 58% above the ten-year quarterly average.
The total take-up figure for the M4 corridor was boosted by a number of large deals in Q3, including the 139,239 sq ft lease by Huawei at Green Park in Reading, and IMG’s 107,459 sq ft lease at Stockley Park, Heathrow.
Take-up for the M25 region was 522,152 sq ft, which Knight Frank describes as “relatively robust”, at 17% above the previous quarter’s total and 12% below the ten-year quarterly average. The firm notes that the Q2 figure was skewed by the major Aker pre-let at Chiswick Park, but says the M25 market for available office space was more active in Q3, with 35 deals after only 20 during the previous quarter.
The lack of speculative development and the limited amount of good-quality secondhand space being released onto the market mean that overall availability has continued to edge lower – in the M25 region the vacancy rate fell to 7.9% in Q3, the fourth successive fall and the lowest level in more than two years. In the M4 corridor the vacancy rate dropped to 9.6%, the lowest for four years.
The amount of brand-new space available in the M4 area has reached its lowest for four years, as occupiers have shown a strong preference for high-quality office space – new and secondhand Grade A space accounted for 95% of take-up in the region during the third quarter.
Knight Frank notes that M25 development could break the 1m sq ft mark during Q4, as Blackstone is expected to go ahead with the speculative construction of Building 7 at Chiswick Park – the last undeveloped plot there, totalling 315,000 sq ft.
Emma Goodford, head of South East offices at Knight Frank, says M25 offices take-up is now back on track to reach the firm’s forecast of 2.1m sq ft for 2012, which is around 15% below the ten-year annual average. Activity in the Thames Valley region, meanwhile, has beaten the firm’s expectations, and Knight Frank has therefore revised up its forecast for 2012 take-up for the M4 corridor to 1.65m sq ft from 1.5m sq ft – in line with the 10-year average.
“The tightening of New and Grade A supply is likely to put upward pressure on headline rents within the key Thames Valley and West London markets over the next three years,” she added. “Developers would be well-advised to position themselves for refurbishment opportunities with ample car parking in the most active locations”.
