Market snapshot

Office Market Pulse M1 Corridor Q3 2014

Along the M1 Corridor, there is a reversal of fortunes with take-up in Milton Keynes dropping significantly compared to the stellar levels seen in Q2. Elsewhere in Luton and Northampton, take-up has risen in Q3. As with Q2, Q3 saw a continued shortage of grade A space which is expected to result in rental growth and a reining in of incentives.

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In this issue:

Fortunes reversed along the M1 corridor

  • Following a stellar level of take-up in Milton Keynes in Q2, with levels reaching 143,000 sq ft, take-up in Q3 was limited to 37,286 sq ft. The majority of that was sub 5,000 sq ft transactions.
  • In Northampton, take-up in Q3 stood at 56,162 sq ft which was an improvement on the 30,666 sq ft take-up in Q2. The most significant transaction was the letting of 26,340 sq ft at Lakeside House.
  • Luton continues to benefit from office to residential conversions in the centre of town with freehold PDR transactions driving the market to a Q3 high with take-up of 70,000 sq ft. At Unity House, 30,000 sq ft of conversion opportunity is available. This loss of space, however, will undermine town centre office supply.
  • There was limited take-up of grade A space along the M1 corridor. This looks set to change as a number of deals are expected to be completed in Q4.

Grade A space continues to be limited

  • The M1 Corridor continues to suffer from the lowest levels of supply since 2009. With limited evidence of new development, the shortage of grade A space is expected to stay for the next two to three years and seriously hinders occupier choice.
  • In Milton Keynes, Frontier Estates are expected to complete negotiations with Grant Thornton to deliver new grade A space into the market. Besides from this, the only new space available is 15,000 sq ft at One Grafton Mews.
  • Luton has approximately 80,000 sq ft grade A space available at Capability Green and around 20,000 sq ft at The Village. Northampton has less than 10,000 sq ft.
  • With this lack of grade A space, the biggest impact on occupier demand will be rental growth and a reduction in the gap between gross and net rents as incentives are reined back in response to the fall in availability.

Enquiries are rising

  • The first half of 2014 saw levels of occupier demand fluctuate along the M1 corridor, but we are now seeing a return to occupiers opening discussions about new build and pre-let opportunities.
  • In Q3, Lambert Smith Hampton opened up discussions with occupiers looking at possible pre-lets totalling 195,000 sq ft in significant tranches of space.

Key transactions, Q3 2014

Property Size (sq ft) Landlord(s) Tenant Lease information
Matrix House, Milton Keynes 5,000 Institutional landlord Norland

Three year term at £9.50 per sq ft plus a small rent free incentive

Mill Court, Milton Keynes

8,500 Prop Co Tissal

Leasehold deal - terms confidential

Icknield House, Dunstable

20,404 LPA Receivership Private individuals

Freehold sale

Sceptre House, Luton 4,750 Ravenscourt Investments Ltd InTraining Group Five year lease at £12.00 per sq ft with tenant break at the third year. Small incentive package
Lakeside House, Northampton 26,340 National Grid Charles Nova Croft Sub lease from National Grid at an undisclosed rent for a term of eight years
Swan Valley, Northampton 4,800 JS Bloor Services Avery Leasehold deal - terms confidential

Regional transaction volumes outstrip those in London

Our latest UK Investment Transactions (UKIT) report has found that investment in the UK commercial property sector during the third quarter of 2014 reached £16.3bn - a 37% increase on the previous quarter and 41% higher than in the corresponding period last year.

Download the full report here.


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