Office news 7th May 2015

Take-up reached around 730,000 sq ft across the South East for Q1 2015, down 2% on the final three months of 2014, reports BNP Paribas Real Estate.

According to the agent the Thames Valley saw around 480,000 sq ft of transactions, which is the second best start to a year since 2008 and has seen it "power ahead of the other two key South East markets, North M25 (34,260 sq ft) and South M25 (209,569 sq ft)".

Rents continue to rise, particularly for the South and West London markets, with occupiers continuing to pay ‘market setting’ rents, such as with LG and Cargill at Rockspring’s Velocity scheme in Weybridge.

The biggest deal of the quarter saw Gartner take a prelet of a new 130,000 sq ft building on the site of its home at Tamesis in Egham and ended a three-year search for the US-tech company, BNP PRE said.

It added: "The dynamics of rents and supply in the South East is continuing to create a two-speed market, with key locations like Reading, Weybridge and the West London sub-markets of Wimbledon, Hammersmith and Richmond all seeing their rental tone shifting substantially in the last 12-18 months, with historically high rents being achieved.

Hugh White, Head of National Investment for BNP Paribas Real Estate said: “Restricted Grade A supply and improved occupier sentiment across the South East, but particularly within the West London sub-markets, has encouraged investors to take the plunge and drive yields down. We believe these investors will be well rewarded. Established centres such as Hammersmith, Chiswick, Richmond and Wimbledon have already seen substantial rental growth while the ripple effect has led to quoting rents at Ruskin Square in Croydon rising to £35 per sq ft.”

In the investment market activity levels remained high with over £400m ploughed into South East offices, the biggest deal being the Rackspace Campus in Hayes being bought for £127m (6.08% net initial yield) by Threadneedle. UK Institutions continue to lead the way, with L&G, Threadneedle and Orchard Street conducting the three biggest transactions to date.

White commented: “Orchard Street’s £58.7m purchase of St George’s House in Wimbledon at 4.56% net initial yield, signifies where the market has now moved to, particularly as Threadneedle were marketing the building at £51.4m a 5.25% net initial yield.”