Market snapshot

Office Market Pulse South Coast Q4 2013

Activity remained positive in the South Coast office market in Q4, 2013, with take-up reaching 93,253 sq ft.  This raised total take-up for 2013 to 337,366 sq ft, exceeding 300,000 sq ft for the first time since 2011. Prime rents remained stable at £18.50 per sq ft in Q4, while office supply continued to reduce with a number of significant office lettings. 

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In this issue:

South Coast office take-up remains positive

Office activity remained positive in the final quarter of 2013 with take-up reaching 93,253 sq ft.  This meant total take-up for 2013 was 337,366 sq ft, exceeding 300,000 sq ft for the first time since 2011.

With the economy growing at its fastest rate and unemployment at its lowest rate for three years, the number of new enquiries for Q4 has almost doubled from those received in Q4 2012.

Occupational transactions above 2500 sq ft - Q4 2013

Property  Size (sq ft)  Landlord(s)  Tenant  Lease info 
Charlotte Place - Southampton 6,024 Sq Ft McAleer & Rushe Shaw Trust £15 per sq ft,
8 year leases with 3 year tenant breaks over two floors
Enterprise House, Ocean Village, Southampton 7,752 Sq Ft (2,637+ 5,115) Forelle Estates CDD and
United Business Services
CDD deal - 10 year lease,
5 year break, £15.50 per sq ft
Stoneham Gate - Eastleigh 7,221 Sq Ft Mott MacDonald Premier Foods £10 per sq ft, 5 year lease, 3 year break
Avalon House, Winchester 12,335 Sq Ft Winchester City Council Southern Health NHS Trust 15 year lease, 10 year break, £19.50 per sq ft, 12 months rent-free

Decrease in suppy levels

The reduction in office supply has continued to accelerate in the last quarter of the year with a number of significant office lettings, but also sales to development companies looking to profit from the relaxation in planning laws.

Permitted development rights now allow office conversions to residential dwellings without the need for planning permission or S.106 contributions. There is a limited period of three years (ending 30th May 2016) for developers to take advantage of these amended planning laws.

Secondary offices have also been subject to interest from developers for alternative uses such as hotels and student accommodation.

Availability now stands at approximately 1.55 million sq ft.

Prime rents maintained in Q4

City centre prime rents remained at £18.50 per sq ft in Q4. Winchester rents are still out-performing other city centres in the region with prime rents reaching £20 per sq ft. However, out of town prime rents stayed at £18.75 per sq ft.

Key investment deals in Q4 2013

• Eaglepoint, Fareham was sold by Craigard to Threadneedle Property Investments Limited for circa £4.7M reflecting a NIY of 8.25%.

• 30-31 Jewry Street, Winchester was sold by Winchester City Church to Versant Development for £1.5m with a major restaurant chain is reported to be taking a lease of the ground floor.

• Savannah House, Southampton sold to Forelle Estates for £2.45m reflecting a NIY of 15%. The building comprises 24,541 sq ft and is fully let to PWC with a lease expiring 23rd June 2015 at a rent of £446,200 pa.

South Coast office investment performance retained

The UK property investment market experienced a strong second half of 2013, with a marked uplift in transaction levels on a national level. Investment levels in Q4 were in the mid to high teens and the highest the UK has seen since Q3 2007. The office sector has attracted the lion’s share of the market and accounted for around 50% of the total investment volumes in 2013. In terms of the geographical split, the Central London office market remains attractive, particularly to overseas investors; however, many UK institutions and property companies are looking to the regions for better value with regards to yields.

We envisage this will continue into 2014 with the South Coast being likely to attract interest, particularly bearing in mind the lack of good quality Grade A accommodation available in the region.

Probably the highest profile transaction to occur in 2013 happened in the final quarter with Fusion on Solent Business Park owned by Greenhills, selling as part of a larger portfolio, amounting to £60m, which was acquired by Mountgrange.

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Andy Hodgkinson

023 8071 3075

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Andy Hodgkinson
Director - Office Advisory

023 8071 3075

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