Property News Research & Forecasting Paper

South East Office Snapshot

Colliers International has today released its first South East Office Snapshot of 2012.

Key findings

  • Total M25 availability rose again by a combination of a slowdown in demand for larger units across the market and space coming onto the market. Overall vacancy rose to 17.3% with Thames Valley vacancy rising to (16.8%) its highest level for 12 months. Overall Thames Valley availability rose by 2% to cancel out falls recorded in Q3.
  • Quarterly take-up was down by 23% although Thames Valley transactions were on a par with the Q3 total. Activity remains strong for smaller units with TMT occupiers continuing to expand albeit on a modest scale. A number of confidential larger scale requirements look set to be activated in Q1 2012.
  • Specific locations such as Chiswick, Reading, Windsor and Richmond all saw rental uplift over the second half of 2011 as consistent demand for diminishing Grade A product helps to drive up headline rents.

Guy Grantham, Director of Research & Forecasting at Colliers International commented: “Take-up across the major M25 centres in 2011 was just over 8% down on the equivalent 2010 figure coming in at 3.9 million sq ft compared to 4.2 million sq ft over the previous 12 months. Both of these figures are down on the 2009 total of 4.3 million sq ft.

“Vacancy rates remain stubbornly high in the majority of centres with only locations where demand has been above average or the development pipeline has failed to deliver, such as Chiswick Richmond, Hammersmith and Wimbledon. Thames Valley availability rose in the final three months of 2011 but still remained below where it began the year.”

Philip Papenfus, Head of South East Offices at Colliers International commented: “‘The market will continue to be driven by lease events and speculative development will only take place in the established office locations where existing supply constraints allow. There may be scope for less costly refurbishment opportunities, with the option of delivery into a more positive environment in 2013, as opposed to more complicated and comprehensive redevelopment programs with a 24-26 month delivery schedule.

“Many successful and established corporates are continuing to tread water in their existing locations rather than undertake costly and complicated relocations. With capital investment still broadly off the agenda for occupiers, many will look to regear existing leases or renegotiate with existing landlords who will be equally keen to avoid empty rates liability and likely extended void periods.

“We would hope to see 2012 herald a greater number of more ‘opportunistic’ transactions where competitive terms being offered by landlords reap rewards but additional voids may come through M&A activities as cash rich companies apply these resources.”

Glasgow