South coast office 19th November 2014

Office take-up for the South Coast region totalled 86,540 sq ft during Q3 2014 – down on last quarter’s 179,249 sq ft - but still significantly above the quarterly average, reports LSH.

The majority of the lettings were completed at out of town locations while a number involved companies upgrading to better quality accommodation, “highlighting growing confidence in the occupational market”. Grade A space has fallen to 11% of the total supply with occupier demand continuing to improve. The report said prime rents will come under some pressure, although they are being maintained at £19per sq ft (city centre) and £18.75 per sq ft (out of town). Office supply remains static at 1.508m sq ft, however, the share of space has moved away from grade A to grade B and C. LSH said there is strong demand for office to residential conversion with prices rising.

There continues to be severe shortage of prime office buildings available in the region. Only 11% of all current supply is considered grade A, some of which is refurbished older stock. Grade A supply in city centre locations is now less than 2%, pointing to an opportunity for speculative development. Investment wise the report said that as with the rest of the South East, the South Coast office market continues to see a good level of activity, but has not experienced the same level of yield compression as in other areas, such as in the Thames Valley. “This indicates that better returns could be received and that there are wider opportunities for acquisition on the South Coast.”