Office Market Pulse

Q2 2018

Welcome to our latest Office Market Pulse, your comprehensive guide to current activity and trends across all of the UK’s main office markets. We hope you find this research useful and encourage you to get in touch if you need any additional information.

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Name:Nick O’Leary
Tel:01223 814 256
Email:noleary@lsh.co.uk

Take-up (000s sq ft)

A grade
B/C grade
62
63
152

Q on Q

-1%

Prime rent (per sq ft)

£38.00

Q2 2018

£35.00

Q2 2017

£35.00

PEAK

Y on Y

9%
Source: LSH

Years of supply

under construction
existing
1.2
1.3

Y on Y

-9%
Name:David Earle
Tel:020 7198 2270
Email:dearle@lsh.co.uk

 

 

Take-up (000s sq ft)

A grade
B/C grade
0
0
0

Q on Q

0%

Prime rent (per sq ft)

£75.00

Q2 2018

£80.00

Q2 2017

£82.50

PEAK

Y on Y

-6%
Source: LSH

Years of supply

under construction
existing
0.0
0.0

Y on Y

0%
Name:Paul Bullock
Tel:01245 215521
Email:pbullock@lsh.co.uk

There was improved activity in Q2 but not converted into completed deals, as it is still taking companies a long time to make an actual commitment.

The majority of requirements fell into the 5,000-10,000 sq ft size range with a few others up to 30,000 sq ft. Availability stands at 255,000 sq ft similar to Q1, with take-up being just under 21,000 sq ft in 3 deals, of which 15,500 sq ft was the sale of Central House for conversion to residential, being the former Amlin Insurance building.

A three storey 7,740 sq ft office building at 115 New London with 22 parking spaces remains for sale with VP at a reduced price equating to £300 per sq ft.

Take-up (000s sq ft)

A grade
B/C grade
21
4
23

Q on Q

423%

Prime rent (per sq ft)

£24.00

Q2 2018

£24.00

Q2 2017

£25.00

PEAK

Y on Y

0%
Source: LSH

Years of supply

under construction
existing
4.1
4.8

Y on Y

-16%

Hemel Hempstead

Name:Ian Partridge
Tel:01727 896 217
Email:ipartridge@lsh.co.uk

Hemel Hempstead continues to offer the best options for large grade A stock in Hertfordshire, at The Maylands Building, and Brakespear Park, now that Westside is close to being fully let, following lettings to Grass Roots Group, Harman International and Thrive Homes. Whilst there has been little recent activity, there are new lettings pending, if market rumours are to be believed.

Take-up (000s sq ft)

A grade
B/C grade
7
15
28

Q on Q

-52%

Prime rent (per sq ft)

£27.00

Q2 2018

£26.00

Q2 2017

£27.00

PEAK

Y on Y

4%
Source: LSH

Years of supply

under construction
existing
2.9
2.8

Y on Y

2%
Name:Ian Leather – Luton
Tel:01582 450444
Email:ileather@lsh.co.uk

Amongst a number of South East markets, Luton continues to suffer from a shortage of grade A supply with the remainder of available space restricted to grade B and town centre stock.

Take-up has been muted in the first half of 2018 partly due to a lack of good quality supply, with the majority accounted for by Luton Borough Council’s 51,000 sq ft lease at Arndale House in the town centre.

Luton benefits from excellent communications and has further improvements due with major regeneration progressing around the airport. Quality space within Luton continues to offer good value for occupiers in comparison to the surrounding centres on the M1 corridor including Hemel Hempstead, St Albans and Watford.

Take-up (000s sq ft)

A grade
B/C grade
0
53
26

Q on Q

%

Prime rent (per sq ft)

£22.25

Q2 2018

£22.25

Q2 2017

£22.50

PEAK

Y on Y

0%
Source: LSH

Years of supply

under construction
existing
2.4
2.2

Y on Y

8%
Name:Ian Partridge
Tel:01727 896 217
Email:IPartridge@lsh.co.uk

The City has long suffered a lack of good quality stock. One of the notable transactions in 2018 was a lease to Private Fly at the refurbished Clarence House on 6,500 sq ft, as tenants continue to vacate 45 Grovesnor Road, a 65,000 sq ft office building with residential PDR potential following the expiration of the headlease. Otherwise, the letting at £33.50 headline on a five-year term certain on 7,420 sq ft shows the level of rents achievable on grade A space.

Take-up (000s sq ft)

A grade
B/C grade
0
2
16

Q on Q

-100%

Prime rent (per sq ft)

£31.00

Q2 2018

£31.00

Q2 2017

£31.00

PEAK

Y on Y

0%
Source: LSH

Years of supply

under construction
existing
1.4
0.6

Y on Y

112%
Name:Jon Rea-Palmer
Tel:020 7198 2255
Email:jreapalmer@lsh.co.uk

Watford continues to be a highly constrained office market whilst possessing excellent fundamentals as an office location. Take-up was limited at only 16,000 sq ft in three small deals outside of the town centre, but supply will continue to erode at a steady rate with strong interest being shown in the remaining grade A stock.

The latent potential of the market has been recognised with refurbishment of 40 Clarendon Road due to complete next summer and the demolition phase of the second new building on Croxley Park set to start by the end of the year. Further space will be coming available at 38 Clarendon Road within 6 months and it is yet to be seen whether either of the two consented mixed use schemes will progress on Clarendon Road. We envisage rents to remain firm in the next quarter, with growth inhibited by the lack of leasing transactions in the short term.

Take-up (000s sq ft)

A grade
B/C grade
16
39
44

Q on Q

-58%

Prime rent (per sq ft)

£32.50

Q2 2018

£31.50

Q2 2017

£32.50

PEAK

Y on Y

3%
Source: LSH

Years of supply

under construction
existing
1.1
1.4

Y on Y

-24%

Welwyn Garden City / Hatfield

Name:Ian Partridge
Tel:01727 896 217
Email:ipartridge@lsh.co.uk

This year, a lack of stock has led to the focus being largely on Bishops Square, Hatfield Business Park, where refurbished accommodation has facilitated lettings on 8,100 sq ft to Exemplas at Titan Court, and 5,370 sq ft at Helios Court to Scott & York Solicitors at £25.00 per sq ft headline, and relocating from 45 Grovesnor Road, St Albans. Furthermore, three further sizeable lettings are in solicitor’s hands at Bishops Square.

Take-up (000s sq ft)

A grade
B/C grade
0
22
27

Q on Q

-100%

Prime rent (per sq ft)

£24.00

Q2 2018

£18.50

Q2 2017

£30.00

PEAK

Y on Y

30%
Source: LSH

Years of supply

under construction
existing
1.2
2.4

Y on Y

-51%
Name:Alex Tross
Tel:0121 236 2066
Email:atross@lsh.co.uk

Birmingham city centre office market saw an improved performance in Q2. With 169,929 sq ft let, this represents a 14% increase over Q1 and a 51% increase over the same quarter in 2017. Larger lettings of the quarter include 38,000 sq ft to BE Offices at Circle PLC’s Somerset House, 27,000 sq ft to the Environment Agency at the Canal & River Trust’s Aqua and 18,000 sq ft to iHub at Aviva’s Colmore Gate.

This took H1 2018 take-up to 318,412 sq ft, up 28% on 248,466 sq ft in H1 2017. With 31 transactions at an average 5,482 sq ft, activity levels are in line with the long term averages. The serviced office sector continues to be very active, with four different operators taking a total of 73,000 sq ft over the quarter which represents 43% of the total take-up in Q2.

Take-up (000s sq ft)

A grade
B/C grade
170
149
199

Q on Q

14%

Prime rent (per sq ft)

£34.00

Q2 2018

£32.00

Q2 2017

£34.00

PEAK

Y on Y

6%
Source: LSH

Years of supply

under construction
existing
3.7
4.7

Y on Y

-22%
Name:Phil Quiggin
Tel:0115 976 6603
Email:pquiggin@lsh.co.uk

 

At 44,147 sq ft Q2 take-up was up 223% on Q1 2018 and 430% higher than the same quarter last year. 10 deals were recorded with 2 over 5,000 sq ft – the largest being the letting of 13,269 sq ft at Brunel Parkway, Pride Park to Pattonair.

Availability stands at 430,000 sq ft across the wider market, broadly 55/45 in favour of the out-of-town market. Following recent lettings, there is no grade A space available and grade C availability reduced significantly as a result of change of use plans.

Enquiries remain good but Q3 2018 will be a challenging quarter with take-up again likely to be held back by limited availability.

Take-up (000s sq ft)

A grade
B/C grade
44
20
36

Q on Q

123%

Prime rent (per sq ft)

£17.50

Q2 2018

£17.50

Q2 2017

£17.50

PEAK

Y on Y

0%
Source: LSH

Years of supply

under construction
existing
2.9
2.3

Y on Y

29%
Name:Phil Quiggin
Tel:0115 976 6603
Email:pquiggin@lsh.co.uk

Leicester had a superb Q2 with take-up of 80,263 sq ft up 87% on Q1 and 148% greater than the same period last year. There were 16 deals of significance including 7 over 5,000 sq ft – the largest deals being 15,000 sq ft to an unnamed occupier at Leicester Waterside and a 12,431 sq ft letting to Leicester Mercury at 16 New Walk in the city centre.

Availability continues to fall, now just under 382,000 sq ft across the wider market, over 80% of which is located in the city centre. The only building offering grade A space in Leicester is the remaining space in Colton Square, now accounting for 2% of total supply.

Enquiries remain good but Q3 2018 will be a challenging quarter with take-up again likely to be held back by limited availability.

Take-up (000s sq ft)

A grade
B/C grade
80
43
81

Q on Q

87%

Prime rent (per sq ft)

£17.00

Q2 2018

£17.00

Q2 2017

£17.50

PEAK

Y on Y

0%
Source: LSH

Years of supply

under construction
existing
1.2
1.7

Y on Y

-32%
Name:Ian Leather – Northampton
Tel:01604 664399
Email:ileather@lsh.co.uk

Northampton records a new headline rental for existing space of £18.50 per sq ft Century House on The Lakes comprising 9,300 sq ft was fully refurbished by Shroders REIT and has been let on a 10 year term certain to Talent Works to accommodate significant growth in their business.

A new headline rent was achieved on Northampton Business Park with 4,000 sq ft  let to Orbit Housing at £16.00 per sq ft.

Activity is muted but largely restricted by a lack of available quality space.  New development is due to start in Q3 on Waterside Way @The Lakes when we will announce new prime headline rents in excess of £20.00 per sq ft and a significant shift in capital values.

There is circa 100,000 – 125,000 sq ft of unsatisfied occupier requirements which continue to be held back due to the lack of new stock being delivered and a lack of choice.  This is great news for landlords who invest wisely in their existing buildings and provide better than average space.

Take-up (000s sq ft)

A grade
B/C grade
68
21
42

Q on Q

220%

Prime rent (per sq ft)

£19.00

Q2 2018

£19.00

Q2 2017

£19.00

PEAK

Y on Y

0%
Source: LSH

Years of supply

under construction
existing
1.9
1.9

Y on Y

-4%
Name:Phil Quiggin
Tel:0115 976 6603
Email:pquiggin@lsh.co.uk

At 62,525 sq ft, Q2 take-up was down 20% on the previous quarter and 38% down on Q2 2017. Only 12 deals of significance took place, three of which were greater than 5,000 sq ft, the largest being 15,138 sq ft at Equinox in Nottingham City centre to the NHS.

Availability continues to fall, standing at 813,000 sq ft across the wider market, split 60/40 in favour of the out-of-town market. 36% of stock remains to be grade C and in need of refurb whilst only 12% is grade A

Enquiries remain good but Q3 2018 will be a challenging quarter with take-up again likely to be held back by limited availability.

Take-up (000s sq ft)

A grade
B/C grade
63
75
96

Q on Q

-17%

Prime rent (per sq ft)

£19.75

Q2 2018

£19.75

Q2 2017

£19.75

PEAK

Y on Y

0%
Source: LSH

Years of supply

under construction
existing
2.4
4.4

Y on Y

-44%
Name:Adam Varley
Tel:0113 887 6706
Email:avarley@lsh.co.uk

Take-up activity in Q2 followed the same positive momentum as Q1, with the Out-of-town market performing well, helped in large, by the significant lettings at the regions premier business parks White Rose Office Park & Thorpe Park where Perform Group & Pure Retirement acquired a total of 51,997 sq ft of space.

The City Centre market however continues to capture the majority of businesses office requirements with take-up activity holding up strong.  In a slight change from the previous quarter was the impact that the corporate occupier market had (10,000 sq ft + transactions) which dipped compared to previous quarters with the majority of the larger floor plate deals transacted at MEPCs, Wellington Place, highlighted the lack of choice within Leeds and the looming shortage of grade A availability, but also endorsing the developers self believe in the city centre following their decision to continue to speculatively develop when the rest of the market paused.

Take-up (000s sq ft)

A grade
B/C grade
145
192
174

Q on Q

-24%

Prime rent (per sq ft)

£30.00

Q2 2018

£30.00

Q2 2017

£30.00

PEAK

Y on Y

0%
Source: LSH

Years of supply

under construction
existing
2.4
2.7

Y on Y

-13%
Name:Matthew Pickersgill
Tel:0161 242 7055
Email:MPickersgill@lsh.co.uk

A strong Q2 has driven an impressive first half of the year in all Manchester markets both within the city centre and out-of-town. With a number of medium to large requirements still live we anticipate the momentum to continue into the second half of the year.

City centre take-up in Q2 2018 reached 327,035 sq ft across 74 transactions with a number of ‘big ticket’ requirements completing including WSP, On The Beach and Handelsbanken. This is a 16% increase on the same quarter in 2017 and brings the total for H1 2018 to 769,118 sq ft, up an impressive 56% on H1 2017.

The out-of-town markets also enjoyed a fruitful quarter with 216,403 sq ft transacting in South Manchester, bringing the 2018 H1 total to 385,265 sq ft a 16% increase on the same period in 2017. The combined take-up figures for Salford Quays and Old Trafford for Q2 was 52,394 sq ft bringing the  H1 total in this particular market to 121,475 sq ft, seeing another increase of 30% on the same period in the previous year.

Take-up (000s sq ft)

A grade
B/C grade
327
442
302

Q on Q

-26%

Prime rent (per sq ft)

£34.00

Q2 2018

£34.00

Q2 2017

£34.00

PEAK

Y on Y

0%
Source: LSH

Years of supply

under construction
existing
2.4
2.4

Y on Y

0%
Name:Michael Downey
Tel:0191 338 8326
Email:mdowney@lsh.co.uk

The Newcastle office market witnessed an extremely positive second quarter of 2018, with the total volume of office space let across the region reaching 254,147 sq ft. Notable transactions included the 30,369 sq ft letting to Tommee Tippee at Balliol Business Park, the 36,993 sq ft sale to Hays Travel at Gilbridge House, Sunderland, and DWF and GVA’s acquisition of Central Square South which cemented the headline rent of £23.50 per sq ft set in Q4 2017.

Grade A office supply continues to dwindle as a result and, while there are a number of new developments in the pipeline, including the Luman at Newcastle Helix which is set deliver 108,000 sq ft of grade A accommodation, these are two-to-three years away from completion.

This limited availability, combined with increasing levels of requirements, has provided a clear opportunity for landlords to capitalise on bullish terms.  We anticipate prime city centre rents will likely surpass £24.00 per sq ft by the end of 2018.

Take-up (000s sq ft)

A grade
B/C grade
54
39
55

Q on Q

37%

Prime rent (per sq ft)

£23.50

Q2 2018

£23.00

Q2 2017

£23.50

PEAK

Y on Y

2%
Source: LSH

Years of supply

under construction
existing
2.4
3.1

Y on Y

-23%
Name:Tom Burlaga
Tel:0114 270 2706
Email:tburlaga@lsh.co.uk

Following a solid start to 2018, Q2 has seen a continuation of strong occupier take-up with 111,235 sq ft being transacted of which 79,935 sq ft were city centre deals.

Whilst the majority of deals were sub 5,000 sq ft, there were a number of larger transactions including SYHA, TES Global and British Business Bank who took 25,000, 16,000 and 10,000 sq ft respectively with the latter two illustrating the demand for Grade A space and the need to cater for larger requirements; an issue the Sheffield market will have to face with dwindling Grade A supply.

Out-of-town, the refurbishment of space at Meadowhall Business Park has been vindicated resulting in two new lettings although available space still remains in short supply due to little speculative development.

Take-up (000s sq ft)

A grade
B/C grade
111
94
88

Q on Q

18%

Prime rent (per sq ft)

£23.00

Q2 2018

£23.00

Q2 2017

£23.00

PEAK

Y on Y

0%
Source: LSH

Years of supply

under construction
existing
2.2
2.8

Y on Y

-19%
Name:Josh Levy
Tel:0161 242 7061
Email:jlevy@lsh.co.uk

Take-up across the Liverpool city centre and out-of-town markets totaled 130,000 sq ft in Q2, slighty down on the previous quarter, albeit closely in line with the five-year average. However, the city centre recorded a strong quarter, boosted by a number of key deals. These included Everton Football Club’s 28,634 sq ft lease at the Royal Liver Building and Instant Group’s 19,746 sq ft lease at Watson Building.

There is an acute lack of grade A supply, with no grade A options in the city centre. Positively, the construction of 160,000 sq ft at Paddington Village will commence this year, following the Royal College of Physicians’ 80,000 sq ft pre-let at the Spine.

Take-up (000s sq ft)

A grade
B/C grade
131
131
143

Q on Q

-30%

Prime rent (per sq ft)

£20.50

Q2 2018

£20.50

Q2 2017

£22.00

PEAK

Y on Y

0%
Source: LSH

Years of supply

under construction
existing
2.8
3.8

Y on Y

-26%
Name:Ian Davidson
Tel:0131 226 0328
Email:idavidson@lsh.co.uk

Take-up across the Edinburgh office market totalled 348,485 sq ft in Q2, up 15% on the average and the strongest quarter in 12 months. The largest transactions in Q2 were the 109,153 sq ft letting of 525 Ferry Road to Edinburgh Palette, the 61,000 sq ft pre let of the Mint Building at West Register Street to Baillie Gifford and the 43,801 sq ft let at 11/12 Lochside Place to Diageo.

There continues to be a shortage of good quality office accommodation in Edinburgh.  While Grade B space is plentiful in out-of-town areas, the availability of Grade A remains extremely limited.  In town, the only significant new scheme completing this year is 2 Semple Street (38,000 sq ft) whilst Capital Square, Morrison Street (122,000 sq ft) is on site but not due to complete until 2020 and already witnessing strong pre-let interest. M&G are expected to commence development of The Haymarket shortly, however completion is not anticipated until late 2020. The lack of built stock continues to fuel rental growth with prime rents expected to exceed £35.00/sq ft by the end of the year.

Take-up (000s sq ft)

A grade
B/C grade
349
179
302

Q on Q

95%

Prime rent (per sq ft)

£34.00

Q2 2018

£32.50

Q2 2017

£34.00

PEAK

Y on Y

5%
Source: LSH

Years of supply

under construction
existing
1.2
1.3

Y on Y

-11%
Name:Aasia Mohammad
Tel:0141 226 6786
Email:amohammad@lsh.co.uk

City Centre take-up for Q2 was 330,963 sq ft; around 200,000 sq ft more than in the same period in 2017 (130,000 sq ft). This included the Clydesdale Bank pre-let of 110,995 sq ft, take-up is 220,008 sq ft; a 40% increase from the same period last year.

There were 9 lettings over the 10,000 sq ft mark.  Other notable lettings include Scottish Executive at 4 Atlantic Quay (34,728 sq ft), Regus at 100 West George Street and 1 West Regent Street (19,686 sq ft and 30,933 sq ft respectively), Webhelp at 67 Hope Street (20,029 sq ft) and Maxxium at 191 West George Street (10,515 sq ft).

H1 2018 take-up is 593,320 sq ft, an increase of more than double compared with the same period in the previous year. Take-up in the southern and western peripheries also decreased by around 30,000 sq ft compared with the same period in the previous year.  The majority of lettings were in the sub 10,000 sq ft bracket.

Take-up (000s sq ft)

A grade
B/C grade
331
252
154

Q on Q

31%

Prime rent (per sq ft)

£29.50

Q2 2018

£29.50

Q2 2017

£31.50

PEAK

Y on Y

0%
Source: LSH

Years of supply

under construction
existing
2.9
3.8

Y on Y

-25%

Blackwater Valley

Name:Paul Dowson
Tel:01483 446 703
Email:pdowson@lsh.co.uk

The Thames Valley office markets collectively saw a slight rebound in activity in Q2. Take-up across the 14 key markets totalled 362,780 sq ft, up 6% on the previous quarter, albeit remains 26% below the five-year quarterly average.

Noteworthy performers were Oxford with 73,487 sq ft of take-up its best quarter in 12 months, and Slough with take-up of 59,700 sq ft more than double its average.

Total office supply in the Thames Valley now stands at 8.07m sq ft, a contraction of 5% year-on-year. 48% of current supply is grade A stock compared to 53% at the end of Q2 last year. There is a need for new development/refurbishment projects to feed the supply chain in 2019.

Take-up (000s sq ft)

A grade
B/C grade
42
12
55

Q on Q

249%

Prime rent (per sq ft)

£27.50

Q2 2018

£27.50

Q2 2017

£27.50

PEAK

Y on Y

0%
Source: LSH

Years of supply

under construction
existing
3.0
3.2

Y on Y

-7%
Name:Tom Fletcher
Tel:0118 959 8855
Email:tfletcher@lsh.co.uk

The Thames Valley office markets collectively saw a slight rebound in activity in Q2. Take-up across the 14 key markets totalled 362,780 sq ft, up 6% on the previous quarter, albeit remains 26% below the five-year quarterly average.

Noteworthy performers were Oxford with 73,487 sq ft of take-up its best quarter in 12 months, and Slough with take-up of 59,700 sq ft more than double its average.

Total office supply in the Thames Valley now stands at 8.07m sq ft, a contraction of 5% year-on-year. 48% of current supply is grade A stock compared to 53% at the end of Q2 last year. There is a need for new development/refurbishment projects to feed the supply chain in 2019.

Take-up (000s sq ft)

A grade
B/C grade
23
28
47

Q on Q

-18%

Prime rent (per sq ft)

£24.50

Q2 2018

£23.00

Q2 2017

£28.50

PEAK

Y on Y

7%
Source: LSH

Years of supply

under construction
existing
3.1
4.0

Y on Y

-23%
Name:Paul Dowson
Tel:01483 446 703
Email:pdowson@lsh.co.uk

The Thames Valley office markets collectively saw a slight rebound in activity in Q2. Take-up across the 14 key markets totalled 362,780 sq ft, up 6% on the previous quarter, albeit remains 26% below the five-year quarterly average.

Noteworthy performers were Oxford with 73,487 sq ft of take-up its best quarter in 12 months, and Slough with take-up of 59,700 sq ft more than double its average.

Total office supply in the Thames Valley now stands at 8.07m sq ft, a contraction of 5% year-on-year. 48% of current supply is grade A stock compared to 53% at the end of Q2 last year. There is a need for new development/refurbishment projects to feed the supply chain in 2019.

Take-up (000s sq ft)

A grade
B/C grade
19
0
24

Q on Q

%

Prime rent (per sq ft)

£33.50

Q2 2018

£33.50

Q2 2017

£33.50

PEAK

Y on Y

0%
Source: LSH

Years of supply

under construction
existing
4.2
4.4

Y on Y

-5%
Name:Tony Fisher
Tel:020 7198 2250
Email:tfisher@lsh.co.uk

The Thames Valley office markets collectively saw a slight rebound in activity in Q2. Take-up across the 14 key markets totalled 362,780 sq ft, up 6% on the previous quarter, albeit remains 26% below the five-year quarterly average.

Noteworthy performers were Oxford with 73,487 sq ft of take-up its best quarter in 12 months, and Slough with take-up of 59,700 sq ft more than double its average.

Total office supply in the Thames Valley now stands at 8.07m sq ft, a contraction of 5% year-on-year. 48% of current supply is grade A stock compared to 53% at the end of Q2 last year. There is a need for new development/refurbishment projects to feed the supply chain in 2019.

Take-up (000s sq ft)

A grade
B/C grade
0
0
45

Q on Q

%

Prime rent (per sq ft)

£34.50

Q2 2018

£33.50

Q2 2017

£34.50

PEAK

Y on Y

3%
Source: LSH

Years of supply

under construction
existing
5.0
4.2

Y on Y

20%
Name:Caroline Waldron
Tel:01628 676 001
Email:cwaldron@lsh.co.uk

The Thames Valley office markets collectively saw a slight rebound in activity in Q2. Take-up across the 14 key markets totalled 362,780 sq ft, up 6% on the previous quarter, albeit remains 26% below the five-year quarterly average.

Noteworthy performers were Oxford with 73,487 sq ft of take-up its best quarter in 12 months, and Slough with take-up of 59,700 sq ft more than double its average.

Total office supply in the Thames Valley now stands at 8.07m sq ft, a contraction of 5% year-on-year. 48% of current supply is grade A stock compared to 53% at the end of Q2 last year. There is a need for new development/refurbishment projects to feed the supply chain in 2019.

Take-up (000s sq ft)

A grade
B/C grade
16
27
33

Q on Q

-40%

Prime rent (per sq ft)

£39.50

Q2 2018

£38.50

Q2 2017

£39.50

PEAK

Y on Y

3%
Source: LSH

Years of supply

under construction
existing
3.2
4.3

Y on Y

-27%
Name:Tom Fletcher
Tel:0118 959 8855
Email:tfletcher@lsh.co.uk

The Thames Valley office markets collectively saw a slight rebound in activity in Q2. Take-up across the 14 key markets totalled 362,780 sq ft, up 6% on the previous quarter, albeit remains 26% below the five-year quarterly average.

Noteworthy performers were Oxford with 73,487 sq ft of take-up its best quarter in 12 months, and Slough with take-up of 59,700 sq ft more than double its average.

Total office supply in the Thames Valley now stands at 8.07m sq ft, a contraction of 5% year-on-year. 48% of current supply is grade A stock compared to 53% at the end of Q2 last year. There is a need for new development/refurbishment projects to feed the supply chain in 2019.

Take-up (000s sq ft)

A grade
B/C grade
0
5
9

Q on Q

%

Prime rent (per sq ft)

£23.50

Q2 2018

£23.00

Q2 2017

£23.00

PEAK

Y on Y

2%
Source: LSH

Years of supply

under construction
existing
3.7
2.6

Y on Y

41%
Name:Kevin Wood
Tel:01865 200244
Email:kwood@lsh.co.uk

The Thames Valley office markets collectively saw a slight rebound in activity in Q2. Take-up across the 14 key markets totalled 362,780 sq ft, up 6% on the previous quarter, albeit remains 26% below the five-year quarterly average.

Noteworthy performers were Oxford with 73,487 sq ft of take-up its best quarter in 12 months, and Slough with take-up of 59,700 sq ft more than double its average.

Total office supply in the Thames Valley now stands at 8.07m sq ft, a contraction of 5% year-on-year. 48% of current supply is grade A stock compared to 53% at the end of Q2 last year. There is a need for new development/refurbishment projects to feed the supply chain in 2019.

Take-up (000s sq ft)

A grade
B/C grade
74
58
62

Q on Q

27%

Prime rent (per sq ft)

£32.00

Q2 2018

£31.00

Q2 2017

£32.00

PEAK

Y on Y

3%
Source: LSH

Years of supply

under construction
existing
2.0
2.3

Y on Y

-10%
Name:Nick Coote
Tel:0118 960 6912
Email:ncoote@lsh.co.uk

The Thames Valley office markets collectively saw a slight rebound in activity in Q2. Take-up across the 14 key markets totalled 362,780 sq ft, up 6% on the previous quarter, albeit remains 26% below the five-year quarterly average.

Noteworthy performers were Oxford with 73,487 sq ft of take-up its best quarter in 12 months, and Slough with take-up of 59,700 sq ft more than double its average.

Total office supply in the Thames Valley now stands at 8.07m sq ft, a contraction of 5% year-on-year. 48% of current supply is grade A stock compared to 53% at the end of Q2 last year. There is a need for new development/refurbishment projects to feed the supply chain in 2019.

Take-up (000s sq ft)

A grade
B/C grade
70
104
113

Q on Q

-33%

Prime rent (per sq ft)

£37.75

Q2 2018

£36.00

Q2 2017

£37.75

PEAK

Y on Y

5%
Source: LSH

Years of supply

under construction
existing
4.1
4.7

Y on Y

-12%
Name:Caroline Waldron
Tel:01628 676 001
Email:cwaldron@lsh.co.uk

The Thames Valley office markets collectively saw a slight rebound in activity in Q2. Take-up across the 14 key markets totalled 362,780 sq ft, up 6% on the previous quarter, albeit remains 26% below the five-year quarterly average.

Noteworthy performers were Oxford with 73,487 sq ft of take-up its best quarter in 12 months, and Slough with take-up of 59,700 sq ft more than double its average.

Total office supply in the Thames Valley now stands at 8.07m sq ft, a contraction of 5% year-on-year. 48% of current supply is grade A stock compared to 53% at the end of Q2 last year. There is a need for new development/refurbishment projects to feed the supply chain in 2019.

Take-up (000s sq ft)

A grade
B/C grade
60
59
26

Q on Q

2%

Prime rent (per sq ft)

£34.75

Q2 2018

£28.00

Q2 2017

£34.75

PEAK

Y on Y

24%
Source: LSH

Years of supply

under construction
existing
8.5
10.6

Y on Y

-20%
Name:Jon Rea-Palmer
Tel:020 7198 2255
Email:jreapalmer@lsh.co.uk

The Thames Valley office markets collectively saw a slight rebound in activity in Q2. Take-up across the 14 key markets totalled 362,780 sq ft, up 6% on the previous quarter, albeit remains 26% below the five-year quarterly average.

Noteworthy performers were Oxford with 73,487 sq ft of take-up its best quarter in 12 months, and Slough with take-up of 59,700 sq ft more than double its average.

Total office supply in the Thames Valley now stands at 8.07m sq ft, a contraction of 5% year-on-year. 48% of current supply is grade A stock compared to 53% at the end of Q2 last year. There is a need for new development/refurbishment projects to feed the supply chain in 2019.

Take-up (000s sq ft)

A grade
B/C grade
0
27
29

Q on Q

-100%

Prime rent (per sq ft)

£34.50

Q2 2018

£34.50

Q2 2017

£34.50

PEAK

Y on Y

0%
Source: LSH

Years of supply

under construction
existing
2.2
3.4

Y on Y

-36%
Name:Jonathan Scott
Tel:020 7198 2015
Email:jscott@lsh.co.uk

The Thames Valley office markets collectively saw a slight rebound in activity in Q2. Take-up across the 14 key markets totalled 362,780 sq ft, up 6% on the previous quarter, albeit remains 26% below the five-year quarterly average.

Noteworthy performers were Oxford with 73,487 sq ft of take-up its best quarter in 12 months, and Slough with take-up of 59,700 sq ft more than double its average.

Total office supply in the Thames Valley now stands at 8.07m sq ft, a contraction of 5% year-on-year. 48% of current supply is grade A stock compared to 53% at the end of Q2 last year. There is a need for new development/refurbishment projects to feed the supply chain in 2019.

Take-up (000s sq ft)

A grade
B/C grade
0
23
18

Q on Q

-100%

Prime rent (per sq ft)

£36.00

Q2 2018

£35.00

Q2 2017

£36.00

PEAK

Y on Y

3%
Source: LSH

Years of supply

under construction
existing
8.1
13.7

Y on Y

-41%

Milton Keynes

Name:David Ball
Tel:01908 544905
Email:DBall@lsh.co.uk

Milton Keynes continues to struggle with subdued levels of activity, with take-up of 50,477 sq ft in Q1 and only 48,749 sq ft in Q2. 2018 to on target to better 2017, albeit is expected to be circa 30-40% down on the 10-year average of 300,000 sq ft.

However, during Q2 there was a flame of hope due to a flurry of requirements and inspections by some quality existing MK & non- MK occupiers, with sizes ranging from 5,000 sq ft up to 35,000 sq ft.

The ongoing construction of 100 Avebury Boulevard, already forming part of the skyline, has attracted immediate high levels of interest, while at the lower end of the market recent weeks have seen a surge in requirements for up to 2,000 sq ft

Take-up (000s sq ft)

A grade
B/C grade
49
50
70

Q on Q

-3%

Prime rent (per sq ft)

£22.50

Q2 2018

£22.50

Q2 2017

£22.50

PEAK

Y on Y

0%
Source: LSH

Years of supply

under construction
existing
2.3
3.4

Y on Y

-31%
Name:Andrew Hodgkinson
Tel:01489 579579
Email:ahodgkinson@lsh.co.uk

The weak take-up of office space has continued in Q2 following a disappointing Q1, albeit the number of transactions increased showing some positive movement in the market. Norwegian Cruise Lines took the largest space with further expansion at Mountbatten House in a 10,000 sq ft letting of grade A space. The average deal size was 5,240 sq ft reflecting the continued trend towards occupiers taking smaller floorspace. There are rumours that Eastleigh Borough Council are in talks to agree a 60,000 sq ft pre-let at its Leigh Road site.

Availability stayed relatively static as the small amount of take-up was countered by refurbished space coming back both in the city centre and out-of-town markets. These included further space at Lakeside near Portsmouth, where over 100,000 sq ft of refurbished space is available.

Take-up (000s sq ft)

A grade
B/C grade
48
27
95

Q on Q

76%

Prime rent (per sq ft)

£22.00

Q2 2018

£21.00

Q2 2017

£22.00

PEAK

Y on Y

5%
Source: LSH

Years of supply

under construction
existing
2.9
3.4

Y on Y

-14%
Name:Peter Musgrove
Tel:0117 914 2013
Email:pmusgrove@lsh.co.uk

Office take-up for Greater Bristol returned to average levels for the second quarter of 2018 with the out-of-town market performing better than expected. At 143,904 sq ft, the city centre take-up was in line with the 5-year average. The out-of-town market saw 139,000 sq ft transacted, which is largely down to UWE’s acquisition of 77,673sq ft at HP 3 and 4.

There continues to be no new speculative development which is putting pressure on supply levels and leading to concerns for the future. Resolution’s launch of approximately 50,000 sq ft refurbished space at Programme, and Legal and General’s launch of another 50,000 sq ft of refurbished space at Temple Point will help to meet demand in the short term, but with any new developments likely to take two years or more to complete there are concerns that Bristol may lose occupiers to other cities who are able to provide the calibre of space that they require, in the required timeframes.

Take-up (000s sq ft)

A grade
B/C grade
144
124
158

Q on Q

16%

Prime rent (per sq ft)

£32.50

Q2 2018

£28.50

Q2 2017

£32.50

PEAK

Y on Y

14%
Source: LSH

Years of supply

under construction
existing
1.0
1.3

Y on Y

-26%
Name:Steven Matheson
Tel:029 2052 3004
Email:smatheson@lsh.co.uk

59,000 sq ft of take-up is a very low figure for Cardiff, as one the standout performers of the regional cities over the last couple of years. The largest letting of the quarter was 6,461 sq ft to post production company Splice who have taken additional space in the City Centre. There is a growing TV and Media presence within Cardiff directly linked to the new BBC Wales HQ at Central Square, a deal the BBC were advised on by LSH. The 150,000 sq ft HQ reached practical completion this quarter with the keys handed to the BBC to begin their fit out ready for occupation Q1 2019.

Supply remained consistent with circa 1.2m sq ft total current availability, with the split of city centre to out-of-town markets 60/40. Only 200,000 sq ft of exisiting grade A space is currently available. Speculative developments 3 and 4 Capital Quarter (77,000 sq ft and 90,000 sq ft) are badly needed to increase the grade A offering within the City Centre.

Take-up (000s sq ft)

A grade
B/C grade
59
67
142

Q on Q

-12%

Prime rent (per sq ft)

£25.00

Q2 2018

£25.00

Q2 2017

£25.00

PEAK

Y on Y

0%
Source: LSH

Years of supply

under construction
existing
2.2
2.9

Y on Y

-23%
Name:Ed Cloke
Tel:02920 523 021
Email:ECloke@lsh.co.uk

A Q2 take-up of 17,500 sq ft was better for Swansea after a very disappointing Q1 of sub 5,000 sq ft. We hope a flurry of activity in the second half of the year will mean we hit the long term annual average take-up of 84,000 sq ft.

Traditionally Swansea’s office take-up has been largely out-of-town by virtue of having the UKs first ever ‘Enterprise Zone’ built in 1981. However, we have seen a return to the City Centre with excellent schemes such as Coastal Housings ‘Urban Village’ attracting occupiers and re-invigorating the High Street. Q2 saw 60% of take-up in the City Centre compared to Out-of-town.

Supply remained stable at just over 225,00 sq ft though there is a desperate lack of good quality grade A stock. Prime rents remain at £14.50 per sq ft.

Take-up (000s sq ft)

A grade
B/C grade
18
4
22

Q on Q

397%

Prime rent (per sq ft)

£14.50

Q2 2018

£13.50

Q2 2017

£14.50

PEAK

Y on Y

7%
Source: LSH

Years of supply

under construction
existing
2.6
2.4

Y on Y

7%
Name:Greg Henry
Tel:028 9026 9265
Email:ghenry@lsh.co.uk

Office market activity in Belfast had a stellar start to 2018, reaching the highest half year take-up on record and surpassing the annual total for the past ten years. Activity was more than double H1 2017 and 49% above the five-year H1 average. Take-up was underpinned by the Department of Finance’s 150,000 sq ft lease of Nine Lanyon Place, the single biggest letting in the past decade.

Supply in Belfast has remained stable over the past six months, currently standing only 1% lower than the end of 2017. New build space is in short supply, but availability is supported with major refurbishment projects, including the refurbishment and addition of two extra floors at the 212,000 sq ft Merchant Square due for completion in Q2 2019.

Prime rents are forecasted to rise to £22.00 per sq ft by year end, with potential for further rental growth in the vacuum before new developments are delivered.

Take-up (000s sq ft)

A grade
B/C grade
268
270
105

Q on Q

-1%

Prime rent (per sq ft)

£21.00

Q2 2018

£20.00

Q2 2017

£21.00

PEAK

Y on Y

5%
Source: LSH

Years of supply

under construction
existing
2.2
2.9

Y on Y

-26%
Name:Tony Fisher
Tel:020 7198 2250
Email:tfisher@lsh.co.uk

Take-up (000s sq ft)

A grade
B/C grade
13
40
38

Q on Q

-68%

Prime rent (per sq ft)

£18.50

Q2 2018

£18.50

Q2 2017

£18.50

PEAK

Y on Y

0%
Source: LSH

Years of supply

under construction
existing
0.9
0.9

Y on Y

0%
Name:David Earle
Tel:020 7198 2270
Email:dearle@lsh.co.uk

Take-up (000s sq ft)

A grade
B/C grade
0
0
0

Q on Q

0%

Prime rent (per sq ft)

£110.00

Q2 2018

£110.00

Q2 2017

£110.00

PEAK

Y on Y

0%
Source: LSH

Years of supply

under construction
existing
0.0
0.0

Y on Y

0%
Name:David Earle
Tel:020 7198 2270
Email:dearle@lsh.co.uk

Take-up (000s sq ft)

A grade
B/C grade
0
0
0

Q on Q

0%

Prime rent (per sq ft)

£87.50

Q2 2018

£87.50

Q2 2017

£87.50

PEAK

Y on Y

0%
Source: LSH

Years of supply

under construction
existing
0.0
0.0

Y on Y

0%
Name:David Earle
Tel:020 7198 2270
Email:dearle@lsh.co.uk

Take-up (000s sq ft)

A grade
B/C grade
0
0
0

Q on Q

0%

Prime rent (per sq ft)

£85.00

Q2 2018

£85.00

Q2 2017

£85.00

PEAK

Y on Y

0%
Source: LSH

Years of supply

under construction
existing
0.0
0.0

Y on Y

0%

Paddington/Marylebone

Name:David Earle
Tel:020 7198 2270
Email:dearle@lsh.co.uk

Take-up (000s sq ft)

A grade
B/C grade
0
0
0

Q on Q

0%

Prime rent (per sq ft)

£67.50

Q2 2018

£67.50

Q2 2017

£67.50

PEAK

Y on Y

0%
Source: LSH

Years of supply

under construction
existing
0.0
0.0

Y on Y

0%

Euston/Kings Cross

Name:David Earle
Tel:020 7198 2270
Email:dearle@lsh.co.uk

Take-up (000s sq ft)

A grade
B/C grade
0
0
0

Q on Q

0%

Prime rent (per sq ft)

£75.00

Q2 2018

£75.00

Q2 2017

£80.00

PEAK

Y on Y

0%
Source: LSH

Years of supply

under construction
existing
0.0
0.0

Y on Y

0%
Name:David Earle
Tel:020 7198 2270
Email:dearle@lsh.co.uk

Take-up (000s sq ft)

A grade
B/C grade
0
0
0

Q on Q

0%

Prime rent (per sq ft)

£70.00

Q2 2018

£70.00

Q2 2017

£72.50

PEAK

Y on Y

0%
Source: LSH

Years of supply

under construction
existing
0.0
0.0

Y on Y

0%

Farringdon/Clerkenwell

Name:David Earle
Tel:020 7198 2270
Email:dearle@lsh.co.uk

Take-up (000s sq ft)

A grade
B/C grade
0
0
0

Q on Q

0%

Prime rent (per sq ft)

£70.00

Q2 2018

£72.00

Q2 2017

£70.00

PEAK

Y on Y

-3%
Source: LSH

Years of supply

under construction
existing
0.0
0.0

Y on Y

0%
Name:David Earle
Tel:020 7198 2270
Email:dearle@lsh.co.uk

Take-up (000s sq ft)

A grade
B/C grade
0
0
0

Q on Q

0%

Prime rent (per sq ft)

£67.50

Q2 2018

£68.00

Q2 2017

£70.00

PEAK

Y on Y

-1%
Source: LSH

Years of supply

under construction
existing
0.0
0.0

Y on Y

0%
Name:David Earle
Tel:020 7198 2270
Email:dearle@lsh.co.uk

Take-up (000s sq ft)

A grade
B/C grade
0
0
0

Q on Q

0%

Prime rent (per sq ft)

£65.00

Q2 2018

£65.00

Q2 2017

£65.00

PEAK

Y on Y

0%
Source: LSH

Years of supply

under construction
existing
0.0
0.0

Y on Y

0%
Name:David Earle
Tel:020 7198 2270
Email:dearle@lsh.co.uk

Take-up (000s sq ft)

A grade
B/C grade
0
0
0

Q on Q

0%

Prime rent (per sq ft)

£42.50

Q2 2018

£47.50

Q2 2017

£48.00

PEAK

Y on Y

-11%
Source: LSH

Years of supply

under construction
existing
0.0
0.0

Y on Y

0%
Name:James Couse
Tel:020 7955 8416
Email:jcouse@lsh.co.uk

Current availability of stock stands at 824,000 sq ft with 719 ,000 sq ft being secondhand offices, representing only 3.6 % vacancy rate only which is Indicative of the consistent demand for high quality space at this tim. Take-up was 176,000 sq ft with pre-lets accounting for 41,000 sq ft and 77,430 sq ft of secondhand space, an increase of 58% on the previous quarter. The largest letting was to CBRE Managed Services Ltd, totalling 75,000 sq ft at 61 Southwark Street SE1. Peak rents are around £67 per sq ft.

Take-up (000s sq ft)

A grade
B/C grade
0
0
0

Q on Q

0%

Prime rent (per sq ft)

£67.50

Q2 2018

£65.00

Q2 2017

£67.50

PEAK

Y on Y

4%
Source: LSH

Years of supply

under construction
existing
0.0
0.0

Y on Y

0%

Traditional Office District

Innovation district

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Knowledge District

St John's Quarter

Portland Street Corridor

Cultural District

Heart of the City

Sheaf Valley and Cultural Industries Quarter

Riverside and Kelham Island

St Vincent's and St George's

Devonshire and The Moor

Hemel Hempstead
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Central Business District
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Districts of Manchester

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Activity picks up in Q2

Following a relatively subdued start to the year, the UK occupier market gathered pace in the second quarter. UK-wide take-up totalled 7.3m sq ft in Q2, up 19% on Q1 and 15% above the ten-year quarterly average.

Take-up rebounds in the capital

Central London fared particularly well in Q2. Take-up was 3.4m sq ft, 23% above Q1 and 9% above the ten-year average. 17% of the Q2’s take-up was accounted for by a single major deal, the Chinese Embassy’s 589,417 sq ft forward purchase of Royal Mint Court, EC3 for its own occupation.

Other substantial deals in Q2 comprised Publicis’s lease of 211,998 sq ft at BBC Media Village, W12 and BCLP’s lease of 127,317 sq ft at Governors House, EC4.

UK’s major regional cities continue to thrive

Collectively, the Big Six markets recorded take-up of 2.1m sq ft in Q2, up 15% on Q1 and 31% above the ten-year quarterly average. Glasgow was home to the largest deal in the Big Six, with Clydesdale Bank’s 110,995 sq ft pre-let of 177 Bothwell Street helping to propelled take-up in the city centre to 330,963 sq ft, 158% above trend.

Elsewhere in the regional markets, Belfast had another impressive quarter, with take-up of 268,336 sq ft one of its strongest on record. This was underpinned by the Department of Finance’s Properties Division’s 149,200 sq ft lease of Nine Lanyon Place, the largest deal outside London in Q2.

Grade B/C supply moves to record low

UK-wide availability fell by 2% over Q2 to stand at 49.4m sq ft. Central London saw a slightly sharper fall of 4% over the quarter, while the Big Six regional cities saw a slight increase in availability of 1% during Q2, as a number of speculative developments came to within 12 months of completion.

While UK-wide grade A supply was stable during the quarter, grade B/C space fell by 4% to a record low of 32.7m sq ft at the end of Q2. This fall was driven by the markets outside of London, with some of the tightest supplied markets seeing the strongest falls, including Bath and Cambridge. Meanwhile, in Central London, grade B/C supply was steady while grade A supply declined by 12% over the quarter.

Big Six sees flurry of new starts

Outside London, speculative development picked up by 13% during the quarter to stand at 3.7m sq ft. This is focused in the Big Six markets, where Manchester and Glasgow saw the largest volume of starts in Q2, including 187,412 sq ft at 2 New Bailey, Manchester and 94,000 sq ft at Cadworks, Glasgow.

Rents are stable

Despite uncertainty in the market, prime headline rents remained broadly steady in Q2. Only two of the 52 Pulse markets saw an increase in prime rents during Q2; South Bank increased back from £65.00 to £67.50 per sq ft, and Slough increased from £34.00 to £34.75 per sq ft.

Despite the possibility of increasing caution in the market around Brexit, tight levels of grade A supply will support rental levels throughout the remainder of 2018. Tight supply is also providing opportunities for refurbishment, a trend which we expect to spread to other markets. ‘Differentiated’ product, targeted at smaller, cost conscious occupiers is expected to emerge as a key source of supply.

For more information contact Izzy Watterson, Senior Research Analyst.

Respectable volume in Q2

UK-wide office volume totalled £6.1bn in Q2, up 11% on Q1 and standing almost exactly in line with the five-year quarterly average. However, despite solid volume overall, there were diverging levels of activity between the office sub-sectors in Q2.

Central London volume returns to form

Investment in Central London rebounded in Q2 following relatively subdued volume in the previous three quarters. At £4.3bn, volume was its strongest since Q2 2017 and underpinned by the UK’s largest deal of 2018 to date, namely CK Asset Holdings’ £1.0bn (3.95% NIY) acquisition of 5 Broadgate, EC2 from British Land and GIC.

Investment in South East offices remains relatively elevated, with volume surpassing £500m for a fourth successive quarter in Q2. This included DWS’s £240m acquisition of S9 in Stratford’s International Quarter, London from Lendlease and LCR.

Meanwhile, regional office activity was below par in Q2. Volume of £711m was the lowest since Q2 2017, down 14% on the five-year quarterly average. However, this was largely explained by an absence of major transactions, with the number of deals 20% above the five-year quarterly average.

 

Overseas volume increases

Overseas buyers dominated volume in Q2 is usual fashion, investing £3.8bn into UK offices. As ever, Central London was the focus, accounting for 85% of capital deployed. However, the volume of disposals was also its highest in ten quarters, resulting in net purchasing of £975m in Q1, the lowest since Q3 2016.

Institutions remained net sellers of UK offices, albeit marginally at £36m. While they were net sellers across the majority of subsectors, they were net buyers of Rest of UK offices to the tune of £154m. This was boosted by Canada Life Assurance’s £64m acquisition of One Angel Square, Northampton from Northamptonshire County Council.

Local authorities continue to invest in commercial property, acquiring £206m of UK offices in Q2. Runnymede Borough Council purchased four of the ten assets, including the Pine Trees complex in Staines for £80.7m from Aberdeen Standard.

Income driving returns

The relatively stable yield environment and moderating rates of rental growth point to an easing down in total returns in 2018, with income driving investment performance. The IPF Consensus published in May 2018 forecasts a total return of 3.3% for offices over 2018 as a whole, with a slight fall capital values in Central London offices providing the main drag on overall sector performance.

For investors seeking both value and up-front return, well located regional offices may become increasingly appealing in the current market. Relaxation in permitted development and a relatively weak development cycle has kept supply levels in check and, provided investors can accommodate to the structural changes to occupier demand, this may be the sector of choice for the IRR-seeking investor.

For more information contact Oliver du Sautoy, Head of Research

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