• Office supply rose by 5.6% to 1.374 million sq ft in Q2 2015
• We expect to see a return to longer term trend of contraction expected by the year end
The increase in supply seen during Q2 was due to a number of buildings returning to the market in the city centre, such as buildings at Nelson Gate where HSBC has moved outside of the city centre and Mountbatten House, which Lloyds Register vacated to move to a purpose built office.
However, with strong take up figures anticipated for the second half of 2015, we expect a fall in office supply, in particular, prime office accommodation.
Looking ahead to the next two to three years, this may well create a problem for businesses in our region, with the anticipation of office supply being squeezed further through strong and increasing year on year take up and no new development in the pipeline. We face the real prospect of losing business to other markets unless new space can be provided.
In the medium term, if the current economic conditions continue, this should mean a rise in prime rents beyond £20 per sq ft where the right supply and demand dynamics prevail, which we anticipate will stimulate the next wave of office development for the region in locations such as Southampton Science Park, Lakeside North Harbour and Royal Pier Waterfront.