Market snapshot

Office Market Pulse South Coast Q1 2014

Office market take-up was slower than anticipated in Q1 2014 on the South Coast, despite encouraging market activity. Supply remains static, with concern rising over low Grade A stock levels and headline rents in specific locations rose, with incentives reducing.

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In this issue:

Take-up slow despite encouraging market activity

  • Take-up slower than anticipated despite encouraging market activity.
  • Supply remains static but concerns over low Grade A stock levels.
  • Headline rents in specific locations rising with incentives reducing.

 

Take-up for the South Coast region fell to 37,644 sq ft in Q1 2014, 39% down on the same period in 2013 and 60% down on the previous quarter. However there is encouraging activity in the market, with the average requirement size up from 5,500 sq ft to 6,750 sq ft.

We anticipate take-up will recover as the year progresses as strong demand is evident from the insurance, recruitment, telecoms and construction sectors.

Occupational transactions above 2500 sq ft - Q1 2014

Property  Size (sq ft)  Landlord(s)  Tenant  Lease info 
Turnpike House, Eastleigh 8,350 Sq Ft Perbury Investments Kier Construction Assignment of lease expiring 2018
Forum 3 - Fareham 5,963 Sq Ft Kensington Group Plc, c/o Investec Interbay Funding Ltd 5 year lease, 3 year break, £14.00 per sq ft
1-2 Kingdom Close - Fareham 4,979 Sq Ft AXA Suntrust Life and Pensions Moog Insensys Ltd £6 per sq ft, 10 year lease
Abacus House, Southampton 4,750 Sq Ft Sahota & Sahota Paint Pots day nursery 10 year lease 5 year break, £10.60per sq ft rent

Decrease in suppy levels

The reduction in office supply has abated with take-up slowing considerably this quarter. Availability now stands at approximately 1.52 million sq ft.

The severe shortage of prime office buildings available in the region is of major concern. Less than 3% of the total availability is city centre Grade A stock with only 14% of all supply being considered Grade A.

Prime rents maintained

City centre and out of town prime rents have improved to £19.00 and £18.75 per sq ft respectively in micro-locations where the supply of Grade A stock is tightest. Winchester rents are still out-performing other city centres in the region with prime rents reaching £20 per sq ft.

South Coast office investment activity maintained

There is continued activity within the South Coast office investment market with two deals completing this quarter. We also understand Arcadia House, Southampton is under offer at £4.95m reflecting a NIY of 7.5%.

Southampton is currently seeing the most investment activity in the South Coast with two further properties on the market: Brunswick Gate and New Kings Court.

Another high profile office investment that is currently on the market is 4000 Parkway, Solent Business Park which is let to NATs. Offers are sought in excess of £72,000,000, which reflects a Net Initial Yield of 6.01%.

Key investment deals in Q1 2014

  • Latimer House, Southampton was sold by a private vendor to Ashfield Group for circa £1.2m reflecting a NIY of 10.6%
  • Spring Place, Southampton was sold by M&G to Maritime and Coast Guard Agency for £12m with reflecting a NIY of 10%

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Andy Hodgkinson

01489 663534

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Andy Hodgkinson
Director - Office Agency

01489 663534

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