Market snapshot

Office Market Pulse Hertfordshire Q4 2014

The Hertfordshire office market witnessed an increasing number of enquiries in the final quarter of 2014. However take-up has been slow, largely due to falling supply, which can be partly attributed to the impact of permitted development rights (PDR). As supply continues to be limited and the number of enquiries rises, we expect to see a steady increase in headline rents over the course of 2015.

To read and sign-up to receive Office Market Pulses from other UK centres, click here.

In this issue:

Enquiries on the up, but take-up slows

  • Quarter-on-quarter Watford and Hemel Hempstead have seen a decline in take-up in the final quarter of 2014. This is particularly evident on the Maylands Industrial Estate in Hemel Hempstead, which witnessed a surge in take-up over the first half of the year but has seen this decline with limited availability of high quality space available.
  • Similarly, Watford saw a 65% fall in take-up and stock availability is dramatically low.
  • Conversely, Hatfield figures have been boosted by 23,000 sq ft take-up at Apollo Court and St Albans by a number of smaller deals, although there is now a desperately low level of supply.

Supply continues to decline

  • The supply of offices in Hertfordshire continues to be limited, highlighted by Watford only offering 37,000 sq ft of Grade A space in the town centre for units over 5,000 sq ft. With a lack of noteworthy development schemes, it is expected that supply in the region will continue to dwindle.
  • The exception to this rule is Welwyn Garden City where two large office blocks at Trinity Park have been brought to the market, boosting Grade A supply by approximately 100,000 sq ft.
  • The impact of PDR driving the conversion of office to residential accommodation has had a profound effect on office supply, removing significant amounts of space from the Hertfordshire market. Hemel Hempstead, for example, has seen supply fall by over 150,000 sq ft as a result of PDR.
  • Furthermore, historically large swathes of land have been bought up for residential development, limiting the amount of new commercial stock being built.

Rents remain largely unchanged, but incentives diminish

  • Prime rents have remained much the same year-on-year, with only central St Albans seeing any notable increase from £23 per sq ft in Q4 2013 to £25 per sq ft in Q4 2014.
  • Incentives have been diminishing in the majority of the region with rent free periods shortening and break clauses becoming less frequent, ensuring that ‘effective rents’ have increased.
  • As supply continues to be limited and the number of enquiries rise, we expect to see a steady increase in headline rents over the course of 2015.

Key transactions, Q4 2014

Property

Size (sq ft)

Landlord/ Vendor Tenant/ Purchaser Lease information
Apollo Court, Hatfield

23,048

Goodman

Ocado  

£16.50 per sq ft to be confirmed

2 Abbey View, St Albans

7,740

Threadneedle Investments Yum 10 year lease at £25 per sq ft
Cedar House, St Albans

7,400

Artisan     Star Cargo    Freehold sale
Shire House, Watford

8,261

Provini Ltd    Private Freehold sale
1 Croxley Green, Watford

11,000

Threadneedle Investments Servest Two year lease at £12 per sq ft

Investment is rising in the regions

The latest edition of Lambert Smith Hampton’s UK Investment Transactions report reveals that investment in the UK regions increased by 41% to £21.1bn for the year as a whole – the second highest figure on record. This is primarily the result of the resurgence of UK institutional investors – which increased inflows by almost 30% in 2014 – buoyed by improving economic sentiment beyond the capital.

Investment levels in Hertfordshire have been steady. The most noteworthy investor was Threadneedle Investments continuing to increase their holdings in the region with the purchase of Hemel One for £17.8M in Q4.

Download the full report here.

Regions

How can we help?

Submit