South east offices 28th December 2012

The outlook for the Thames Valley office market is “encouraging” heading into 2013 after a patchy 2012, according to Cushman & Wakefield’s projected figures.

Cushman’s current figures for the year*– excluding any changes before the year end – are revealed here. While take up was down in 2012 from 2011 at 1.17m sq ft as opposed to 1.268m sq ft, there are already at least seven potential transactions in solicitor’s hands, totalling approximately 330,000 sq ft, that is targeting completion in Q1 2013.

Supply is likely to remain steady and close to the 3.38m sq ft currently and unlikely to exceed 3.5m sq ft in H1 2013. There are seven speculative schemes under construction, totalling 530,000 sq ft, with no further spec starts expected in H1 2013.

Cushman reports encouraging growth in demand, albeit from a low bench mark. Prime yields have remained stable at 6.25% over the year. Its records indicate a significant increase in lease events from 2013 to 2015 (approximately 12m sq ft) which is expected to drive an increase in demand. Encouragingly the average prime headline rent achievable across the Thames Valley is 10.5% higher at £26.40 per sq ft than the lowest point in this cycle (£23.90 in Q2 2009).

Charles Dady, head of UK business space at Cushman & Wakefield, said: “There are some positive messages for the Thames Valley market albeit not based on a spike in demand. Importantly, supply has been edging downwards during the downturn. At the end of this year, grade A supply stands at 3.3m sq ft compared to the end of 2003 when it peaked at 6.58m sq ft. "In terms of the relationship between supply and take-up, that translates into three years’ worth of supply in the system now, compared with five years’ worth in 2003.

Certain sub markets are seeing rental growth thanks to diminishing supply levels such as Chiswick, Maidenhead and Stockley Park where the vacancy rate has dipped below 10% for the first time in over 10 years.” Andrew Agnew, associate partner, said: “There have also been an encouraging number of serviced office occupiers who, having tested their market, are looking to make the leap into traditional leasehold premises.” * Rents are prime rents achievable.Take up is for transactions in excess of 20,000 sq ft.Supply is Grade A units or schemes in excess of 20,000 sq ft.