Market snapshot

Thames Valley Office Market Pulse Q4 2017

Take-up in the Thames Valley office market fell back slightly in Q4 2017, replicating the quarterly outcome in 2016. The active sectors were technology media and telecommunications (33%) and Finance Banking & Insurance (19%), with Bracknell and Reading seeing the most take up. Enquiry levels in Q4 were 23% below the last 5 year Q4 trend and the 2017 total was 21.7% below the previous year.

Investment into office assets for Q4 2017 demonstrated healthy investor appetite for well-located stock. Total volume for the quarter was £282m, demonstrating an 8.14% decrease on Q4 2016. £188m of these transactions were within the Town Center further demonstrating a demand for well-located stock.

In this issue:

Lowest Q4 enquiries for six years as 2017 total falls 21.7% against 2016

84 enquiries (over 5,000 sq ft) were received for Thames Valley offices in Q3 2017, a fall of 17.6% compared with the 102 received in the previous quarter. Looking at a five year period, this is 23% below the five year Q4 average of 110 and the lowest Q4 level of enquiries recorded in the last six years.

Total office enquires in 2017 totalled 403 against 515 the previous year, a fall of 21.7%.

The main falls were in the 5/10,000 sq ft and 20/50,000 sq ft bands.


Demand picks up in Q4 but annually 2017 only ends up 1% above 2016

Take-up in Q4 2017 was 449,121 sq ft, an increase of 49 % from the 300,675 sq ft transacted in the previous quarter and slightly (2%) more to Q4 2016’s total of 439,331 sq ft.

Total take-up to the end of 2017 is 1,718,724 sq ft against 1,701,596 in 2016, a slight increase of 1% over the year..The two most active business sectors in Q4 2017 were, Technology, Media and Telecommunications (33%) Finance Banking & Insurance (19%).

Bracknell was the town with the largest take up in the quarter; totaling 137,702 sq ft (31% of Thames Valley total offices take up in Q4 2017). Reading had second largest take up total of 118,703 sq ft (26%).

Significant occupational transactions

    

   Property

 

Size (sq ft)

   

    Landlord

    

     Tenant

 

Rent (per sq ft)

     Lease(years)

Voyager Place, Maidenhead

    55,596

Clearbell

FM Global

£32.00

          10

Kennet Place, Reading

    42,120

Westcore Europe

Instant Offices

Confidential

Confidential

Maxis 2, Bracknell

    41,846

Hines/Oaktree

Panasonic

Gr Flr: £23.50 1st Flr: £24.00

10

2 London Square, Guilford

27,089

M&G

WSP

£32.50

10

Maxis 2, Bracknell

    23,801

Hines/Oaktree

JDA Software

£24.00

10

Strata Building, Stains

    18,000

LIM

Blemont Green

£34.50

10

Western Peninsula, Bracknell

    17,063

Fidelity

Bracknell Forest Homes

Avg. £22.40

10

Greenwood, Bracknell

    16,567

Savills IM

ON Semi Conductor

£20.00

10

Maxis 1, Bracknell

    16,500

Hines/Oaktree

Riverbed Technology

£24.00

10

The Blade, Reading

16,376

Northwood Investors

Pure Offices

Confidential

Confidential

Office supply falls 17.2% highlighting the need for new development

Standing at 7.78m sq ft at the end of Q4 2017 and the year, Thames Valley total supply has fallen by 1,615,065 (17.2%), compared to the 2016 year-end total of 9.4m.

Grade A total supply has risen by 308,474 over the year a 10.5% increase to the total at end of 2016, reflecting new development completions, which will not occur in 2018.

The supply chain is heavily reliant on new development. We will see an accelerated fall as investors/developers respond cautiously, to the slight fall in annual take-up to the end of 2017. The letting velocity and volume, in the short to medium term will be telling in this regard. Although the picture may be patchy as there may be a short term over supply in some locations.

Grade A supply is now 52.4% of the total, compared with 52.67% at end of Q4 2016.

Investment market review

There were a total of 16 transactions in Q4, with an average lot size of £17.6m, reflecting the current ‘sweet-spot’ for many investors between £15 and £20m.  The average WAULT for transactions during the quarter was 6.24 years, which, when compared with 10.26 years in Q4 2016, clearly demonstrates the shift in the market’s appetite for risk.

2017 saw a total take up of £1.88bn against £2.28bn in 2016. This is due to a lack of stock with demand remaining strong from UK Institutions, Overseas Buyers, Property Companies and Private Investors. Overall, South East office transactions have maintained at recent levels of volume exceeding £4bn. 

Key investment deals

The Shipping Building, Hayes  
Floreat Real Estate have purchased The Shipping Building, Hayes for £32.75m from Moorfield Group, reflecting a yield of 5.01% and £328 per sq ft net capital value. 

Dukes Court, Woking

The largest deal of Q4 was Woking Borough Council’s £72.3m purchase of Dukes Court, further demonstrating Local Authorities appetite for investing.  This multi-let building totals 250,000 sq ft and a net capital value of £289 per sq ft. 


The Blade, Reading 
The Blade was one of a number of town centre multi-lets which came to the market in Q3. Northwood purchased the asset from AVIVA for £41.575m, being just shy of quoting and reflecting a net initial yield of 7.39%.

Want more information about this Snapshot?

Charlie Lake | Director - Capital Markets | London
Charlie Lake

020 7198 2227

Email me

Regions

Contact us now

Nicholas Coote
Head of Thames Valley

0118 960 6912

How can we help?

Submit