Market snapshot

Office Market Pulse Thames Valley Q3 2015

The Thames Valley office market experienced an impressive Q3 2015, with take-up increasing by 88% in Q3 2014 compared with Q3 2015 and 83% year-on-year.

Even more encouragingly, we have also seen a real spike in enquiries in Q3 2015, up 84% compared to same quarter last year and now up 21% in total for the year to date.

This spike in enquiries is expected to translate into take-up, maintaining the current positive market dynamic into at least the first half of 2016.

Nick Coote, head of the Thames Valley for Lambert Smith Hampton comments: “The evidence is now quite clear that statistically, the Thames Valley market is enjoying its best year for many years."

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In this issue:

Record number of quarterly enquiries

• There were 175 new office enquiries (over 5,000 sq ft) in Q3 2015 – 84% up on the same quarter last year

• Looking at 2015 as a whole, the running total to the end of Q3 is 391– an increase of 21% compared with the same point in 2014

This record Q3 enquiry figure has completely changed the annual dynamic from the position at the end of Q2 (which showed a drag of 5%) and we expect transactions to increase as we approach the year end.


Impressive increase in take-up of 88%

• Total take-up of offices (over 5,000 sq ft) in Q3 2015 was 839,720 sq ft, an increase of 88% compared with 445,780 sq ft in the same period in 2014

• Total take-up in 2015 so far is 1.74m sq ft, compared with just 952,537 sq ft at the end of Q3 2014 - an increase of 83% year on year

Lambert Smith Hampton is predicting a bumper year for Thames Valley office take-up in 2015, with a forecast of a total year end take-up level of over 2m sq ft.

66% of all the take-up in Q3 2015 was grade A and 32% grade B. As we predicted in our last update, the proportion of grade A take-up is continuing to climb due to the removal of the quality end of the grade B supply chain leaving occupiers, who all want quality, to focus increasingly upon the newly built options.

Supply profile continues to move towards grade A space

Total office supply in the Thames Valley market at the end of Q3 2015 stands at 9.03m sq ft, compared with 10.02m sq ft at the end of Q3 2014. This represents a fall of nearly 10%. 

This is clear evidence that take-up is now running ahead of new supply and this will be reflected in upward pressure on rents and downward pressure on the incentives offered to tenants.

The proportion of grade A supply has increased from 32% of the total at the end of Q3 in 2014 to 44.5% of total supply to the end of Q3 2015, largely due to the new speculative development pipeline boosting the figures, particularly in Reading.

Significant Thames Valley office transactions

Property
Landlord 
Tenant
Size (sq ft)
Lease (break)
Rent (per sq ft)
1 Forbury Place, Reading M&G SSE 190,000 15 years Confidential
60 Jubilee Avenue, Milton Park, Abingdon MEPC Adaptimmune 67,000 25 years £26.50
Ascot House, Maidenhead Aberdeen Asset Management Ascenden 51,000 11 years (6 years) £22.00
Lovett House, Staines
Astellas Pharma Gartner 45,261 5 years £25.00
55 Western Avenue, Milton Park, Abingdon MEPC  Schlumberger  45,000 Confidential £26.50 
3 Guildford Business Park, Guildford LGIM  Philips Electronics  34,205  10 years (5 years)  £26.00 
Capitol, Bracknell Blackrock  IHS  30,000  10 years  £20.00 
Carina Court, Reading  The Church Commissioners  College of Estate Management  23,061  Freehold sale   
420 Thames Valley Park, Reading  Deutsche Bank  OpenText  23,032  10 years (5 years)  £24.50 
The Point, Maidenhead Kames Capital  CSL Behring  20,946  10 years  £33.50 
Ditton Park, Slough  Computer Associates  Advanced Computer Software  19,313  10 years (5 years)  Confidential 


Investment overview

The value of investments transacted in the Thames Valley during Q3 2014 totalled £361.5m across 24 transactions, which is a slight decrease on Q3 2014 (£526.40m). However, there is a further £325m currently under offer. 

This, coupled with the £579.5m of office stock currently available to buy, which has largely come on line since the start of September, indicates that Q4 will finish the year with record transactional volumes in this cycle.  

There have been a number of significant assets brought to the market to bolster these figures. SEGRO’s assets on Bath Road in Slough amount to £326m of availability and Reading International accounts for approximately £150m of assets currently in solicitor’s hands. 


Key investment deals

• Blackrock acquired The Atrium in Uxbridge, a multi-let office with an AWAULT of 4.3 years. The property sold in August for £55m, reflecting a net initial yield of 6.11% and a capital value per sq ft of £372. 

• Velocity on Brooklands in Weighbridge was sold in August by Rockspring to Orchard Street Investment Management for £55.63m, reflecting a net initial yield of 5.70%. The property is 70% let to two tenants with the remaining accommodation subject to a rent guarantee. 

• CCLA purchased 5 Arlington Square in Bracknell. This 97,000 sq ft prime town centre office has under three years remaining on an over-riding lease of the whole at just under £25 per sq ft, but was sub-let to multiple parties. The property was acquired from Goodman for £38.1m, reflecting a net initial yield of 5.96%.

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Nicholas Coote

0118 960 6912

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Nicholas Coote
Head of Thames Valley

0118 960 6912

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