Landlords seeking freehold sales of business park offices – GVA
Take-up of office space on business parks in the UK reached 1.9m sq ft during the second half of 2012, says GVA, which is in line with the six-monthly average but down from the 2.5m sq ft recorded for H1 2012. The strongest activity was in the South East, Midlands and North West.
The vacancy rate for business park offices has risen slightly to 19.3%, with strong variations between regions. In prime locations such as the M42 and South Manchester vacancy rates are falling, whereas elsewhere they are increasing. There has been a marked increase in demand for the Birmingham out-of-town market, GVA notes. Overall availability has now started to plateau after rising significantly in recent years, says GVA: it totalled 18.5m sq ft at the end of 2012, which was 0.7% more than after the first six months of the year.
Given the high level of vacant, available office space on business parks, there are only a handful of such properties being built at the UK, totalling 470,000 sq ft – 90% of which is pre-let, GVA notes. However in the South East, Blackstone has recently announced that it will begin speculative development on the 334,000 sq ft final office building at Chiswick Park. While GVA expects overall levels of development activity to increase, it says this will partly be for hybrid research/office buildings rather than pure office space, and will reflect low-risk pre-sales or pre-funded pre-lets.
Landlords, seeking to avoid void costs and refurbishment costs, have increased their freehold sales to existing occupiers. Freehold sales still make up a small proportion of transactions, but are rising, and occupiers are taking advantage of favourable values. GVA thinks this trend will continue but that prices are now likely to stabilise. It notes that landlords are also reducing the risk of void costs by offering more flexible leases with shorter terms in order to retain tenants. However, demolition is an option in some areas “and will continue to be so, particularly where higher-value alternative uses can be brought forward”.