South east office news 25th July 2014

More than 250,000 sq ft of new office requirements have gone live in recent weeks in the South East office market alleviating concerns over disappointing take-up figures so far this year.

Ambassadorial chocolatier Ferrero Rocher has appointed CBRE to seek around 30,000 sq ft in the North West M25 quadrant. The group, which produces Ferrero Rocher, Nutella, Kinder and Tic Tac, is based at Building 7, Hatters Lane, Croxley Green Business Park.

Separately health insurance group Aetna has appointed Knight Frank to find 30,000 sq ft of offices in the South M25 market. It is based in Croydon and Farnborough and at Highfield Parc on Highfield Road, Oakley in Bedford. Capita is looking at options for a 40,000 sq ft move in Reading where it currently occupies space in FourSquare, 121 Kings Road.

Separately OpenText has appointed CBRE to work on a feasibility study for a potential 50,000 sq ft move in the Thames Valley. It is based at 420 Thames Valley Park Drive at Thames Valley Park in Reading.

In addition Body Shop, advised by BNP PRE, is understood to be looking at circa 30,000 sq ft in the south London area while SMEG advised by LSH is looking at options for a circa 40,000 sq ft move in the Oxford area.

Elsewhere market sources this week said LG has revived a search for as much as 50,000 sq ft as it considers relocating from its offices at 250 - 252 Bath Road Slough. It is not thought to be represented.

Finally Direct Wines is also understood to be considering options for a move from its home at New Aquitaine House, Exeter Way in Theale into up to 30,000 sq ft in the near vicinity with the obvious solution Goodman’s Arlington Business Park. Savills and Strutt & Parker advise Goodman while Direct Wines is unrepresented.

The lift in demand will help add to sentiment that a slow start in terms of take-up in the Thames Valley in the first half of the year will lead to a much better picture by year end.

Statistics released by JLL indicate that South East office take up in the second quarter (Q2) of 2014 has reached 435,350 sq ft, bringing the half-year 2014 total to 805,000 sq ft. Take-up was evenly split between the West London and Thames Valley sub-markets, with the services sector particularly active, accounting for 70% of space transacted throughout Q2.

Rental growth across the Western Corridor continued during Q2, with the prime average rent increasing 6% year-on-year and 1.3% quarter-on-quarter to £30.71. Activity in the investment market increased by 70% in Q2 2014, soaring from £139m in Q1 to £237m.
 
James Finnis, Head of South East Office Agency at JLL said: “Overall take-up levels for H1 are disappointing and reflect the spaceless growth and push for property efficiency which many corporates are striving to achieve. However, the continued growth in active, named demand from occupiers with lease events or who are experiencing real growth, points towards a real surge in leasing activity which will come through in the back end of Q3 and in Q4. “As predicted supply across the Western Corridor fell by 7% year-on-year during Q2, to the lowest level recorded since mid 2009. This is a direct result of office space being converted to alternative uses particularly PDR to residential. There is growing corporate awareness that Grade A supply is constrained and choice is being eroded. This should encourage tenants to accelerate their relocation strategy which underlines our view on increased leasing activity in H2.

Ben Burston, Head of UK Offices Research at JLL, said: “Despite the subdued take-up figures in H1 2014, the tight supply of Grade A space has continued to put upward pressure on rents, particularly in West London, where we have witnessed continued growth in Chiswick, Brentford and Ealing. Looking ahead, the strength of employment growth and named demand will underpin further growth over the medium term, with Western Corridor rents expected to rise by around 4% per annum to end 2018.”