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Research - 06/07/2011

Shortage of quality office space in Thames Valley

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We have launched our Thames Valley Office Market Report 2011, which points at a shortage of quality office space in the region.

In our research we monitor the Thames Valley’s total office stock of just over 64 million sq ft, with current availability standing at 11.3 million sq ft (18%).

Demand recovering from 2009 low

Office demand in the region is recovering from the 2009 low of 1.1m sq ft, with take-up in 2010 totalling just under 2 million sq ft. 2011 has continued in a similarly positive tone, with 700,000 sq ft of take-up in Q1 alone. This is not only a marked improvement from the 2009 low, but an indication of market confidence returning to
2008 levels when 2.7 million sq ft of take-up was recorded.

Steady take-up implies a classic market recovery?

These demand trends over the last three years suggest that the recovery curve is not the ‘double dip’ that the industry feared, but instead the steady volume of take-up implies a more classical recovery. In terms of office supply in the region, this has remained relatively flat over the last year.

There is limited appetite for speculative development, and so vacated secondary space is fuelling office supply in the Thames Valley. Landlords are therefore being challenged to either recycle their existing office stock through refurbishment in order to re-let the space and restore value, or find an alternative use for the property.

Lease events driving occupational demand

From the perspective of the office occupier, the dominant drivers behind acquiring new space are lease breaks and ends. Companies are looking to take advantage of these lease events to acquire space with larger floor plates, closer proximity to transport hubs and improved environmental credentials to facilitate a more modern workplace.

Nick Coote, Head of our Thames Valley team, commented: "Over the next 12 months, as increased demand continues, we anticipate that market supply issues (where there are shortages of quality stock) will become exposed in some Thames Valley centres.

"This may see increases in rents, and potential frustration from occupiers seeking quality solutions in specific locations. The challenge for landlords will be providing the quality product demanded by occupiers, in the right locations, and restoring value to newly vacated stock."

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