Thames Valley Office Market Bounces back in Q1 2015
Up 8% on previous quarter
Colliers International forecasted take-up for the Thames Valley office occupier market lifted eight per cent in Q1 2015 to circa 485,000 sq ft compared with Q4 2014 (397,206 sq ft), indicating that the market is recovering from the previous year’s stagnation.
The global real estate firm credited the bounce back to the ‘Crossrail effect’ as businesses look to capitalise on Thames Valley offices in locations that will benefit from faster commuting time into Central London, ahead of the train line launching in 2017.
Vacancy rates throughout Q1 2015 stand at a record 11 per cent, the lowest since 2002, and are continuing to fall in most major areas throughout the Thames Valley with the exception of Reading, where a number of new developments are coming to the market.
Specific markets bouncing back include Maidenhead, which has gone from ‘bust to boom’ already this year, having seen just 42,000 sq ft leased in 2014, and 95,000 sq ft already under offer in 2015, with both Maersk and Acenden linked to significant signings. Bracknell vacancy levels currently stand at 12 per cent down from 23 per cent in Q1 2010, through the letting of landmark buildings to Reflex and Maxis.
Locations to watch are the ‘re-emerging’ centres such as Bracknell and Slough where the difference in headline rents from the traditional core towns such as Reading and Staines have almost doubled in the last five years, from £6.92 per sq ft at the end of 2009 to £12.35 per sq ft in December 2014. These locations are where the most growth is expected to be seen.
Mark Taylor, Colliers International Head of National Offices, said: “The global companies are working with strong balance sheets and the smaller companies are focused on business models, which are seeing them reach returns at a far earlier stage than ever before. For 2015, we see this continued optimism translate into more of the same but with more of the larger enquiries which have been ‘rumbling’ now converting.
“The markets, be they prime or secondary, are not oversupplied and more pockets are beginning to emerge where Grade A has all but disappeared. One noticeable event for 2015: the occupier is taking note of Crossrail and how it can be used to their benefit when planning their office needs.”
On the investment front, the Thames Valley market has started the year on a high with 12 transactions during Q1 2015, worth c. £280m. Colliers anticipates the market will expand by 13 per cent and capital growth by eight per cent by the end 2015. It also predicts capital growth could increase by 9.7 per cent by 2016 before plateauing in 2017/2018.
Alex Titheridge, Colliers International National Office Investment Director, Explained: “Since the beginning of 2015, the Thames Valley office investment market has been relatively strong and is set to continue growing throughout 2015. However, we are seeing a huge weight of capital chasing limited stock so expect transaction volumes to be less in 2015. There are likely to be fewer net dis-investors as the majority has substantial allocations for property and also little to re-invest their profits into.
“There is appetite for property across the whole risk spectrum but particularly for prime property with secure income streams. Investors continue to be attracted to the sector due to the improving occupational market and increasing rental values. This weight of money continues to be predominantly led by the financial institutions but there is also a strong presence of the private equity/ opportunity buyers typically seeking offices to re-position and portfolio deals.”