Market snapshot

Office Market Pulse Chelmsford Q2 2014

In Q2 2014, the Chelmsford office market saw encouraging signs of an improving market, with nearly 51,000 sq ft in take-up of vacant office space. The lack of grade A space has prompted the refurbishment of grade B offices.

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In this issue:

Office take-up improves

The end of Q2 saw a take-up of nearly 51,000 sq ft of vacant office space over the first six months of the year, reflecting just over 64% of the take-up for the whole of 2013. Clearly, this shows encouraging signs of an improving market and a return of confidence, highlighting the demand from occupiers to be located in Chelmsford.

Severe shortage of grade A supply

There is currently no grade A space available in the city, which has prompted the refurbishment of a number of larger buildings to provide good quality grade B offices. The pressure on supply has also been exacerbated by the conversion of dated office buildings that are no longer fit for purpose. There is currently some 175,000 sq ft that is being converted to residential or with potential for conversion, comprising eight buildings averaging 22,000 sq ft in size, such as Cater House, Rivers House, Threadneedle House, the Gemini Centre and London House.

Improvement in rental and capital values

We have seen a steady improvement in rental and capital values over the last six months, with headline rents peaking at £23.30 per sq ft in February at Priory Place. Chelmer Housing Partnership are selling their 19,875 sq ft HQ building on the Business Park, quoting a price of £5.2m (£262 per sq ft).

Prime office yields compressed

Prime office yields compressed to 7.25% by the end of 2013, but with improving times, net initial yields of 6.25% and 6.75% are currently being quoted for the investment sales of Priory Place (42,277 sqft) and Brierly Place (14,962 sq ft) respectively.

Return of speculative development?

The last speculative office development in the centre of Chelmsford was Priory Place, completed in 2007. Amlin is building out 48,000 sq ft in Victoria Road for its own occupation, and there is currently some 900,000 sq ft of office space in the Chelmsford development pipeline, of which 18% is within the city centre and 82% out of town.

With the lack of grade A space being available to satisfy increasing demand and coupled with improving values, perhaps now is the time for developers to once again grasp the opportunity of kick starting the development cycle?

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Paul Bullock

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Paul Bullock
Associate Director - Office Agency

01245 215502

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