On the basis of Q1 2014 take-up, there is currently 6.3 years’ supply of grade A offices in the Thames Valley (NB: This is very dynamic number - current grade A supply/(Q2 +Q3 + Q4 2014 + Q1 2015 grade A take up).
Office space supply continues to polarise and grade A supply now accounts for 43% of the total, compared with 27% in 2013.
Grade B supply is steadily decreasing...
• 2012 total = 6,368,000 sq ft
• 2013 total = 5,474,000 sq ft
• 2014 total = 4,740,000 sq ft
• Q1 2015 total = 4,638,500 sq ft
The polarisation of Grade A supply is largely due to speculative development activity on the supply side and take up of quality grade B space on the demand side. Occupiers have taken the available high end grade B space out of the market, leaving only the lower end grade B space available. This cannot be replaced unless businesses give up space, which is not happening at present.
Therefore, new occupiers are increasingly faced with a choice between poor end grade B or new grade A space. New quality stock is being developed, but occupiers will have to be prepared to pay higher rental values.