Market snapshot

South Coast Office Market Pulse Q4 2016

The South Coast office market experienced a dip in demand in the latter half of 2016, driven in large part by the political uncertainty surrounding the EU referendum, according to Lambert Smith Hampton's office market pulse, however, despite this, take-up for the year as a whole remained above the long-term average for the region.

We are starting to see an slow rise in demand again in 2017, however, the fundamental issues of a lack of grade A supply and development continue to stifle any significant increase in transactional activity.

In this issue:

Enquiries fall across the region

  • 24 enquiries (over 2,500 sq ft) were received in Q4 2016, a fall of 25% from the 32 received in the previous quarter. 
  • There was also a longer term fall of 14% from the 28 enquiries received in Q4 2015. 
  • Enquiries also dropped 16% for the year as a whole, from 175 in 2015 to 147 in 2016.  

This fall in enquiries across the board is due to political and economic uncertainty at one end of the equation and a known lack of stock at the other. It is likely to contribute to a slow start to take-up in 2017.

Despite uncertainty, demand maintains its long-term average

  • Take-up fell by 14% from 105,470 sq ft in Q3 2016 to 90,933 sq ft in Q4, moving close to the 10-year quarterly average of 90,434 sq ft. 
  • Year-on-year, it increased by 6% from the same quarter in 2015. 
  • Total take-up for 2016 was 329,389 sq ft, a 35% fall from the 10-year high experienced in 2015. 

2016 take-up was 9% below the 10 year average (361,736 sq ft), a consequence of the current uncertainty in the market, a lack of available supply and also a trend for more efficient use of space by occupiers that are relocating. It was also impacted significantly by the unusually low demand seen in Q2 as businesses put occupational decisions on hold whilst awaiting the outcome of the EU referendum. 

Only five transactions completed in Q4, with a lease to Babcock of 54,477 sq ft accounting for 60% of this take-up and continuing the trend of a rise in average deal size. 92% of all take-up took place at Lakeside, Portsmouth, where Northwood Investors had spent £9.5m refurbishing two buildings (totalling 120,000 sq ft) released by IBM at the end of 2015.

We are seeing strong demand from serviced office providers in answer to small businesses valuing short, flexible lease terms over lower rents to facilitate a change in occupancy as the economic situation dictates in the future.

Significant occupational transactions


Size (sq ft)



Lease length

1000 Lakeside, Portsmouth 


Northwood Investors


10 years

2000 Lakeside, Portsmouth 


Northwood Investors

Transas Marine

10 years

3000 Lakeside, Portsmouth


Northwood Investors


10 years

GF South, Savannah House, Ocean Village, Southampton

Forelle Estates


10 years

7th Floor, White Building, Southampton 


Linkhouse Investments

Keoghs Solicitors

5 years

Grade A supply continues to diminish as development is 'almost non-existent'

• Supply decreased marginally by 1.3% to 1.299m sq ft in Q4 from 1.317m sq ft in Q3 and 1.316m sq ft from the same period in 2015.

The majority of supply (57%) is grade B space as occupiers are choosing to improve the working environment for their employees by vacating it and moving to better quality grade A accommodation. As a result, only 14% of available office space is grade A and less than 2% of total supply is grade A city centre accommodation.

Almost all grade A space available on the South Coast is provided by back-to-frame refurbishments of existing buildings and new development remains almost non-existent, with the exception of 5 Benham at Southampton Science Park, which has been facilitated by its own micro-economic climate of high demand and high rents.

Rents face continued upwards pressure due to a lack of supply

A continued reduction in grade A space, is placing upwards pressure on prime rents, for example, 5 Benham Campus at Southampton Science Park is being marketed at £25.00 per sq ft. Prime headline rents elsewhere along the corridor are in the region of £21.00 per sq ft for high quality refurbished offices.

Investment market review

For 2016 as a whole, investment into the South Coast office market totaled in excess of £140m. Stand out activity was seen at Solent Business Park, with Tristan Capitals’ acquisition of Forum for circa £43m and Threadneedles’ off-market purchase of Fusion for circa £35m.
There were limited opportunities for investment in Q4, however, successful transactions to highlight include the sale and purchase of 2 Grosvenor Square, a vacant office building within Southamptonc city centre. This opportunity generated strong interest and eventually sold, after a competitive bidding situation, at a level comfortably in excess of the £4m quote. The local property company that acquired the building will be undertaking a comprehensive refurbishment to provide quality office accommodation to a market which suffers from a notable lack of supply. Furthermore, Troika Developments acquired the circa 20,000 sq ft Unit C George Curl Way, Southampton Airport, which is let to Chloride Power Protection. Deal information remains confidential but it is understood that a figure of in excess of £4m was achieved, reflecting a net initial yield of over 7.50%.  

The South Coast continues to see robust interest for quality stock and opportunities suitable for refurbishment and/or conversion. A number of sales were marketed later in the year, including 1460 Parkway, a multi-let office within Solent Business Park and West Park House, a city centre office building let to Paris Smith Solicitors, the latter we understand is now under offer to a local property company.

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Jerry Vigus, Capital Markets, Industrial
Jerry Vigus

023 8020 6111

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Andy Hodgkinson
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