Market snapshot

Thames Valley Office Market Pulse Q3 2014

The Thames Valley office market is seeing a return to normality following the volatility of the last 18 months. After the surge of enquiries in Q2, and the reasonable levels seen in Q3, we expect the improved Q3 level of take-up to be continued through to the year end and into 2015.

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In this issue:

Increase in enquiries during Q3 2014

Despite a very slow start to the year with the lowest ever level of enquiries recorded in Q1, Q2 in contrast saw the highest ever level of enquiries. Q3 2014 went on to see slightly higher enquiry levels than Q3 2013 and consequently, total enquiries year-to-date are now broadly in line with 2013.

Unsurprisingly, take-up tends to follow enquiry levels with a typical three to six month delay - and we have started to see this in Q3 with much improved take-up.

Q3 2014 take-up down 50% against 2013

Office take-up in 2014 has been disappointing compared with 2013's 2.46m sq ft total; 56% higher than take-up in previous years which hovered between 1.6-1.75m sq ft.
 
Q3 2014 saw 446,000 sq ft office take-up; a much more respectable figure than we saw in Q1 and Q2 this year. However, it is still way short of the 2013 Q3 total of 1m sq ft.

Total take-up to the end of Q3 2014 stands at 980,000 sq ft, compared to 1.95m sq ft in the corresponding period last year. A year-on-year comparison shows a fall of some 50%.
 
We expect Q4 take-up to bring further improvement, so our year end forecast for total office take-up is 1.5-1.6m sq ft, anticipating a return to what may be described as the 'modern norm' (last years' bumper aside).

Thames Valley office transactions above 5,000 sq ft

 Property Size (sq ft)  Rent (per sq ft) Lease information 
Flow One, Staines

42,756

£33.00

10 year lease, confidential terms

93 Milton Park, South Oxfordshire

42,506

- Confidential
Bridge House, Guildford

40,600

£27.00 10 year reversionary lease commencing March 2015 with 19 months rent free
Geneva House, Farnborough

28,340

£17.50 5 year lease
 Flow Two, Staines  20,970  £33.00  10 year lease with confidential terms
 Imperium, Reading  19,950  £20.00  2 year lease with a 12 month break option
90 Milton Park, South Oxfordshire  16,733  Confidential
1 Waterside Drive, Slough  16,386  £100.00  Sold to owner occupier
 Spires House, Oxford  14,130  £19.50 10 year lease with 5 year tenant break and 18 months rent free
 Minton Place, Windsor  13,358  £25.50  10 year lease with 18 months rent free

 

Total office supply stands at 10.02m sq ft

Total supply at the end of Q3 2014 was 10.02m sq ft (2013 - 10.23m sq ft), of which 32% was grade A (2013 - 27%).

This increase in grade A is reflective of new speculative development schemes in the Thames Valley.

Investment in excess of £500 million

The value of investments transacted in the Thames Valley during Q3 2014 totalled £526.40m - a significant increase on Q2 2014 (£218.74m) and also in excess of the same quarter in 2013 (£461m).

We anticipate Q4 returning similar positive results based on the current £93m + of transactions currently in solicitors’ hands and a further £580m being marketed.

22 transactions have completed in Q3 with an average deal size in excess of £23m, highlighting that the demand has principally come from the UK institutions and overseas.  

Key Thames Valley office investment deals in Q3 2014

Aberdeen Asset Management is currently disposing of One Reading Central, which is multi let with a WAULT of over 9.5 years for £88m, reflecting a net initial yield of 6.75% and a capital value per sq ft of £400.00.

Aviva acquired Hunton House in Uxbridge, an office let to British Alcan Aluminium with a WAULT of 12.3 years. The property sold in September for £10,750,000, reflecting a net initial yield of 5.67% and a capital value per sq ft of £433.00.

Market House in Maidenhead was sold in July by Gatehouse Bank to Tesco Pension Fund for £38.8m, reflecting a net initial yield of 5.36%. The property is let to Adobe Systems for a further 9 years term certain with a further 25,346 sq ft currently vacant.

Melford Capital has brought the Rackspace City Campus in Hayes to the market. The 340,000 sq ft 10 acre office development is up for sale for £120m, reflecting a net initial yield of 7%.

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Nick Coote, Thames Valley, Reading, Office agency
Nicholas Coote

0118 960 6912

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Nicholas Coote
Head of Thames Valley

0118 960 6912

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