Market snapshot

Office Market Pulse South Coast Q3 2013

South Coast office market take-up reached 120,909 sq ft in Q3 2013, almost three times higher than the same quarter last year and the highest level since Q4 2011. Office enquiry levels were also up by 39% on Q2 2013, while investment increased with several key deals taking place this quarter.

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In this issue:

South Coast office take-up highest since Q4 2011

•  In Q3 2013, office take-up in the South Coast was at the highest level since Q4 2011, at 120,909 sq ft. This is double Q2 2013 levels and almost three times higher than office take-up for the same quarter in 2012.

•  Take-up for the first three quarters of 2013 already totals 244,113 sq ft, almost equivalent to the entire take-up for 2012.

•  Take-up this quarter consisted of 24 deals, the largest of which was the 15,113 sq ft disposal of Trafalgar House in Winchester to Ashville.

•  The average deal size was circa 5,000 sq ft, an increase from the previous quarter suggesting an improvement in business confidence.

•  New enquiries were also up this quarter and increased by 39% on Q2 2013.

Occupational transactions above 2,500 sq ft: Q3 2013

Property  Size (sq ft)  Landlord(s)  Tenant  Lease info 
Trafalgar House, Winchester 15,113 sq ft Ameriscot Commercial Ashville Sold – confidential.
Hounsdown Business Park, Southampton 13,941 sq ft McNicholas Switch Concepts 6 year sub-lease. Rent £11.25 psf rising to £13.75 psf in 2014. Tenants break after 3.5 years.
Capella House, Southampton 13,906 sq ft Atlanta Trust Roxan Construction Sold £48 psf.
Spectrum, Solent Business Park 10,500 sq ft Craigard LLP Mitie 10 year lease, 5 year break. Rent £10 psf.
West Point House, Southampton 7,062 sq ft Diamond Property Holdings HCS Safety Sold £75 psf with benefit of ground floor income.
Cumberland House, Southampton 6,427 sq ft PGS Nominee Coffin Mew 5 year lease. Rent £16.50 psf.
Mountbatten House, Southampton 6,035 sq ft PFC Hays Recruitment 10 year lease, 5 year rent review, 12 months rent free. Rent £17.50 psf.
Hippodrome House, Southampton 6,000 sq ft Pompey Holdings Portsmouth University 10 year lease.
Athenia House, Winchester 5,368 sq ft Confidential Wilkins Kennedy LLP 15 year lease, 5 yearly rent reviews, option to break end year 13. Headline rent £19.50 psf.
Eagle Point, Fareham 4,850 sq ft Craigard Portland Business & Financial Solutions 5 year lease, tenant break after 3 years.  Headline rent £12.00 psf.

Decrease in suppy levels

•  Reversing the recent upward trend in supply levels over the past year, Q3 has seen a fall in availability down 6% from 1.88 to 1.77 million sq ft.

•  The decrease in supply is mainly Grade B space, down by 8.6%. Based on the current take-up rate this represents less than six years supply

•  While supply levels have been relatively stable over the past 12 months, effective supply levels have been significantly reduced through a number of successful applications for change of use from office to residential.

Prime rents maintained in Q3

Southampton city centre prime rents are being maintained at £18.50 per sq ft, while Winchester rents are still out-performing other city centres in the region with prime rents reaching £20 per sq ft.

This quarter 20 of the 24 deals completed were out of town, reducing oversupply in key office parks e.g. Solent Business Park and 1000 Lakeside and helping to stabilise prime rents. Out of town prime rents remain at £18.75 per sq ft.

Investment performance sustained on South Coast

Commercial Property Investment volumes have increased by 2% between the first and second quarters of the year. The South Coast is no exception with the majority of the UK institutions and property companies looking for opportunities.

Outside of London, the South East is becoming increasingly popular particularly with investors looking for slightly higher yields than those being achieved in central and greater London. Following improvement within the occupational market with lettings higher than previous years, and with the opportunity to acquire properties with slightly higher yields, investors will look more favourably upon the South Coast as an area for office investment.

Key investment deals in Q3 2013

• Leander House, Fareham was sold by Aviva to Carilbrook for circa £5.7M reflecting a NIY of 12.5%. Leander House has a floor area of 43,609 sq ft and is let Northrop Grumman Mission Systems Europe Ltd.

• The Westhampnett Centre, 28/29 Westhampnett Road, Chichester was sold by BlackRock Investment Management to Helmsley Group for £1.68m reflecting a NIY of 7%. NHS Property Services Limited occupies the whole building on a lease expiring 31st August 2024.

• 5-6 Southgate, Chichester is under offer for circa £3.3m reflecting a NIY of 8.25%. The building is arranged over two floors providing a total of 28,813 sq ft and is let to Secretary of State for The Environment on a lease that expires on 24 June 2025.

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Andy Hodgkinson
Director - Office Agency

023 8071 3075

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