Market snapshot

Office Market Pulse M1 Corridor Q1 2014

Despite the acute shortage of grade A supply, Q1 saw increased take-up levels for the M1 Corridor office markets, and last year's surge in demand has continued to gather pace.

You can download a PDF version of this M1 Corridor Office Market Pulse, or to read and sign-up to receive Office Market Pulses from other UK centres, click here.

In this issue:

Office market momentum continues into 2014

Milton Keynes witnessed a significant increase in office take-up throughout 2013 and this momentum has continued into Q1 2014 with just over 40,000 sq ft take-up recorded and further erosion of grade A supply, particularly in Central Milton Keynes.

For the fourth consecutive year, Q1 take-up in Northampton increased, with a total of 51,221 sq ft recorded – just marginally down on Q4 2013 (58,902 sq ft). However, 38,611 sq ft of this take-up will be converted for residential use, indicating that the office-to-residential market is gaining pace as the clock ticks down on relaxed permitted development rights.

Luton saw 23,500 sq ft take-up in Q1, comprised of two deals at Capability Green and Kimpton Road - both grade A buildings.

2013 saw a sea change in demand along the southern M1 Corridor, and this trend has continued into the start of 2014 with a total of 364,500 sq ft of requirements in Northampton; 225,000 sq ft in Milton Keynes and 135,000 sq ft in Luton.

For an annual comparison of take-up, click here.

Key transactions Q1 2014

Property      Size (sq ft) Landlord/Vendor  Tenant/Purchaser  Lease information 
Beaumont House
 32,735 Cordatus  Clayson Group  Residential conversion
The Pinnacle
Milton Keynes 
17,500  Aberdeen Asset  Management  i2 Offices  £20.00 per sq ft 
500 Capability Green, Luton  12,500 IVG  DHL (Williams Lea)  10 year lease with a break at 5
£18.00 per sq ft 
Kimpton Road

Ability Group  Anderson Group  10 year lease
£14.00 per sq ft 
Elder House
Milton Keynes
10,000  Private investor  MITIE  5 year lease, 9 months’ rent free
£13.50 per sq ft 
Larch House
Milton Keynes 
8,000  LPA receiver  Leica Microsystems  10 year lease with break in year 5 and 12 months’ rent free
£16.85 per sq ft 
The Pinnacle
Milton Keynes 
6,500  Aberdeen Asset Management  Baker Tilley  £20.00 per sq ft 

Erosion of office supply continues

The decline of available office space during Q4 2013 has resulted in the lowest levels of supply since 2009 across the M1 Corridor markets.

We expect this acute shortage of grade A space to drive significant investment into the recycling of second-hand office stock in the short-term. For the Milton Keynes office market in particular, where grade A supply in Central Milton Keynes is sub 50,000 sq ft (less than 1% of total stock) there is ample opportunity to recycle early generation buildings.

The permitted development rights for office-to-residential conversion of obsolete buildings is continuing to impact on the overall supply of stock.

For an annual comparison of supply, click here.

Read our Office Market Review 2014: What Occupiers Want.

Property investors turn to the regions

Investment in the UK commercial property sector during the first quarter of 2014 totalled £10.9bn - a 35% increase on the corresponding period last year and the third highest quarterly level since the start of 2007.

The regional markets are receiving more attention from investors, as prime central London prices continue to rise. To view the M1 Corridor region's key transactions, click here.

Investment in the regions more than doubled to £4.2bn, compared to £2.0bn during the first quarter of 2013, and now accounts for 39% of the total, against 25% in the corresponding period last year and 33% during the final quarter of 2013.

Read our latest UK Investment Transactions (UKIT) report here.

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