National Offices & Business Park Survey

Transcription

1 National Offices & Business Park Survey Unrivalled views on commercial property Winter 211/212 Thames Valley M25 Greater London

2 Take-up Trends for 211 totalled 4.38 million sq ft, a 6% improvement on 21 levels and in line with the 5 year average. Take up was evenly distributed throughout the year with all quarters recording in excess of 1 million sq ft, a very similar pattern to 21 with no single quarter out-performing significantly. Tenants continued to demand flexible lease terms, typically 1 year leases with a 5 year tenant option to break. In under supplied markets landlords are now beginning to take a more robust stance and are unwilling to agree to 5 year tenant break options. Longer leases are still however somewhat of a rarity with only 5% of take up on 15+ year leases (233,815 sq ft in 8 transactions) and 15% on 1+ year leases (66,264 sq ft in 26 transactions). 21 saw the out of town lose market share accounting for 54% of total floor space against the 1 year average of 61%. 211 saw the return of off plan and pre-completion lettings in the out of town market resulting in the 1 year average being exceeded and more than regaining the market share lost in 21 accounting for 63% of total floor space. Whilst the average size of transaction has typically been smaller in town than out of town, the difference between the two during the period 27-1 reduced significantly. 211 saw a reversal of this trend with the average out of town transaction increasing by 18% on the previous year to 2,26 sq ft in line with the 1 year average. Conversely, the average size of transaction in town reduced by 7% on 21 levels to 14,955 sq ft, 6% below the 1 year average. Grade A New and Grade A continued to dominate take up accounting for 69% of total floor space. With extremely limited new development in most areas outside of the core Thames Valley Grade A New take up as a percentage of total floor space is down 6% at 965, sq ft. During the past 1 years only 29 witnessed a lower level of take up in this Grade category. Grade A New and Grade A accommodation continues to attract the larger occupiers with smaller occupiers who generally look for greater lease flexibility and lower rents typically gravitating towards Grade B where this is more readily achievable. The average Grade A New letting totalled 22,387 sq ft whilst Grade B totalled only 13,17 sq ft. Annual Take-up: By quarter 8,, 7,, 6,, 5,, 1 yr average 4,, 3,, 5 yr average 2,, 1,, Qtr1 Qtr2 Qtr3 Qtr4 2 National Offices & Business Parks Survey Winter 211/212

3 Annual Take-up: In and out of town 8,, 16 7,, 14 6,, 12 5,, 4,, 3,, 2,, Number of Transactions 1,, In Town Out of Town No. of Transactions - In Town No. of Transactions - Out of Town Annual Take-up: By grade 8,, 7,, 6,, 5,, 4,, 3,, 2,, 1,, Grade B Grade A Grade A New National Offices & Business Parks Survey Winter 211/212 3

4 Take-up Trends The FBS, Computer/Electronics and Chemical/Pharmaceutical sectors dominated take up again in 211 accounting for 66% by total floor space, a slight reduction on the 5 and 1 year averages. The Energy sector increased its influence accounting for 9% of total floor space with major lettings to Centrica, BP and Saipem. Post completion lettings accounted for 86% by total floor space and 95% by number of transactions. Last year we predicted the number of off plan lettings would increase during 211 as a result of limited Grade A New opportunities in a number of locations. 211 saw 11 lettings off plan or during construction, a total of 565, sq ft compared to only 4 in 21 totalling 343,183 sq ft. These included 83,5 sq ft in Cambridge to Microsoft, 81, sq ft in Oxford to Centrica and 92, sq ft in Kingston-upon-Thames to Saipem. Transactions below 4, sq ft last year were in line with 21 accounting for 66% of total floor space (89% by number of transactions). There were 23 transactions in excess of 4, sq ft averaging 54,3 sq ft. 21 witnessed 6 transactions in excess of 1, sq ft whilst last year there were only 2, namely Astellas Pharma in Chertsey and Nestle in Crawley. There were however 4 transactions in the 8-1, sq ft size band compared to none in 21. These were the three pre-lets highlighted earlier and 96, sq ft in Portsmouth to Pall Europe. The Thames Valley which saw a resurgence in 21 had a disappointing year with take up levels 8% below the 1 year average. With the exception of Maidenhead which saw take up levels double the 1 year average all other towns were below. What was missing from the market were transactions in the larger size bands with only 5 in the 4-6, sq ft size band, 1 in the 6-8, sq ft size band and no transactions in excess of 8, sq ft. The key transactions were Adobe Systems at Market House in Maidenhead town centre (48,8 sq ft) and Covance at Building One, Maidenhead Office Park (5,8 sq ft). In Reading PRA International took 43, sq ft at Green Park and Atos Origin 47,5 sq ft at IQ Winnersh. At Heathrow BP acquired 68, sq ft at Bedfont Lakes and Centrica took 47, sq ft on The Causeway in Staines. 211 saw the completion of only one speculative office development, namely Bridgewater House, Finzels Reach in Bristol City centre (11,524 sq ft). Completions are set to improve over the next two years with 873, sq ft of speculative development either on site or due to start shortly. 34, sq ft is due for completion this year in five schemes in Chiswick, Richmond, Weybridge, Uxbridge and Woking. 213 will see a further five schemes complete totalling 533, sq ft in Chiswick, Hammersmith, Maidenhead and Staines. Rockspring are by far the most active with 4 schemes, while BAM, Kames Capital, Development Securities/ SWIP and Blackstone are developing one each. Further development will come through in the form of comprehensive refurbishments of older buildings. A number of funds including Hermes, Prupim, AXA REIM, Aviva Investors, LIM and Schroders have either started or will do shortly on projects this year totalling in excess of half million sq ft. Vacancy rates across the region average 13% but with a wide variation between towns from a low of 5% in Staines to a high of 22% in Bracknell. Grade A New vacancy now averages only 2.9% across the region with some towns having no new buildings available. It is these hotspot towns where speculative development is now taking place. Annual Take-up: By business sector 8,, 7,, 6,, 5 yr computer / electronics trend 5,, 4,, 3,, 5 yr FBS trend 2,, 1,, Chemical / Pharmaceutical Computer / Electronics FBS Telecommunications Other 4 National Offices & Business Parks Survey Winter 211/212

5 Annual Take-up: By commitment type 8,, 7,, 6,, 5,, 4,, 3,, 2,, 1,, Post Completion Pre-Completion Letting Pre-Let Off Plan Land Sale Annual Take-up: By size band 8,, 7,, 6,, 5,, 4,, 3,, 2,, 1,, Annual Take-up: By key Thames Valley towns 2,, - 2, 2, - 4, 4, - 6, 6, - 8, 8, - 1, 1, + 1,5, 5 yr trend 1,, 5, 1 yr trend Reading Bracknell Heathrow Maidenhead Slough Egham/Staines National Offices & Business Parks Survey Winter 211/212 5

6 Take-up and Supply By Location M4 Corridor 2,, 1,5, 1,, 5, Egham/Staines Slough Maidenhead Windsor Bracknell Reading Availability - Grade A New Availability - Grade A Availability - Grade B 211 Take Up Egham/Staines Slough Maidenhead Windsor Bracknell Reading Availability - 247,49 795,925 6,7 117,755 1,289,677 1,63,347 Availability - 345,96 816,525 55,341 73,597 1,27,763 1,624,881 Take Up - Grade A New 158,67 148,792 Take Up - Grade A 6,675 34,374 5,8 28,25 57,88 58,485 Take Up - Grade B 5,82 48,258 26,594 79,76 West London 1,, 8, 6, 4, 2, Heathrow Uxbridge Chiswick Hammersmith Availability - Grade A New Availability - Grade A Availability - Grade B 211 Take Up Heathrow Uxbridge Chiswick Hammersmith Availability - 86,413 29,473 35,43 44,375 Availability - 825, ,76 224,986 44,25 Take Up - Grade A New 11, 57,876 Take Up - Grade A 137,125 46,34 124,139 Take Up - Grade B 116,5 6 National Offices & Business Parks Survey Winter 211/212

7 M4 Corridor 5, 4, 3, 2, 1, Marlow High Wycombe Oxford Abingdon Availability - Grade A New Availability - Grade A Availability - Grade B 211 Take Up Marlow High Wycombe Oxford Abingdon Availability - 155, 289,58 383, ,983 Availability - 222,74 26,48 252,86 115,14 Take Up - Grade A New 81, Take Up - Grade A 69,445 11,759 8, Take Up - Grade B 8,87 5,48 32,75 M3 Corridor 1,, 8, 6, 4, 2, Camberley Fleet Hook Farnborough Basingstoke Availability - Grade A New Availability - Grade A Availability - Grade B 211 Take Up Camberley Fleet Hook Farnborough Basingstoke Availability - 329, ,81 148, , ,875 Availability - 444,65 273,85 82, ,15 87,911 Take Up - Grade A New 37, 33,2 21,457 Take Up - Grade A 6, 11,264 33,69 47,821 Take Up - Grade B 6,7 6,28 16,541 National Offices & Business Parks Survey Winter 211/212 7

8 Take-up and Supply By Location North M25 8, 6, 4, 2, Watford Hemel Hempstead St Albans Welwyn Garden City Hatfield Rickmansworth Borehamwood Availability - Grade A New Availability - Grade A Availability - Grade B 211 Take Up Rickmansworth Watford Hemel Hempstead St Albans Welwyn & Hatfield Borehamwood Availability - Q ,24 58, , ,429 28,48 346,294 Availability - Q , ,52 482,66 178, , ,169 Take Up - Grade A New 7,519 Take Up - Grade A 38,824 69, 7,123 68,35 29,747 Take Up - Grade B 23,61 16,288 11, South M25 5, 4, 3, 2, 1, Redhill Reigate Leatherhead Guildford Woking Weybridge Chertsey Availability - Grade A New Availability - Grade A Availability - Grade B 211 Take Up Redhill Reigate Leatherhead Guildford Woking Weybridge Chertsey Availability - 185,21 141,64 16, ,9 479,97 229,35 146,636 Availability - 182,397 13,78 149,64 368,21 298, ,138 63,871 Take Up - Grade A New Take Up - Grade A 37,696 13, 13, 17,14 18,165 12,98 1,142 Take Up - Grade B 8,23 7,962 31,453 74,153 8,1 8 National Offices & Business Parks Survey Winter 211/212

9 Occupier Demand Analysis 211 saw identified demand improve 2% on 21 and 35% on 29 levels averaging 5.17 million sq ft over the year. Of this demand 17% was under offer at the end of down on 21 (22%) but slightly up on 29 (15%). The 5-2, sq ft size band continues to represent half of all identified demand with the three upper size bands accounting for only 1% by number of enquiries. This pattern has been consistent over the last 3 years. The most significant change witnessed in 211 was improvement in the 4-6, sq ft size band which now represents 14% compared to only 7% in the previous two years. The services and computer/electronics sectors continue to dominate demand with services representing 38% and computers/electronics 3%. This is marginally ahead of take up levels last year where the two sectors combined accounted for 6% of take up by number of transactions. Based on current and historic identified demand we anticipate take up levels for 212 to be in line with the 5 and 1 year averages at million sq ft. Demand by Quarter 6,, Live Named Enquiries By Size Band 5-2, sq ft 2-4, sq ft 4-6, sq ft 6-8, sq ft 8-1, sq ft 1, + sq ft Live Named Enquiries By Business Sector Chemical / Pharmaceutical Computer / Electronics Construction Consumer Goods Energy Government Manufacturing/Distribution Media / Publishing Motor Industry Retail Services Telecoms 5,, 4,, 3,, 2,, 1,, Q1 29 Q2 29 Q3 29 Q4 29 Q1 21 Q2 21 Q3 21 Q4 21 Q1 211 Q2 211 Q3 211 Q4 211 Live Under Offer National Offices & Business Parks Survey Winter 211/212 9

10 Investment Market All UK Property* in 211 produced a Total Return of 8.1% but Capital Growth slowed during the year to 1.2%, with values actually falling during the last quarter of the year. Total Returns for All UK Offices performed comparatively better at 9.4% but performance was generated by Central London, and excluding these figures Total Returns were 6.1% and 3.3% for South East and Rest of UK offices respectively. Office transaction volumes in total were down 11% compared with 21, but transaction volumes outside Central London are recorded at 7.1 billion, reflecting a significant increase of 61% on 4.4 billion recorded in 21. (Property Data) Prime property continues to remain the most favoured asset for both institutional and private investors. Values remain very robust for the right stock, a result of a shortage of supply in both South East and Provincial markets. However investors remain extremely cautious and the definition of prime has narrowed to a selected band of properties in core town and city centres. Demand for prime assets has led to a sharpening of prime yields by up to 25 bps over the last 12 months as investors continue to pay a premium for quality and scarcity of stock Major Provincial Cities 5.75%-6.% South East offices 6.%-6.25% South East business parks 6.%-6.25% We expect values to remain robust for prime assets but further falls in values for assets which present increased risk, either refurbishment costs, reletting risks or exposure to weaker covenants. In our view the widening disparity in values provides an opportunity for assets in selected markets where we are seeing a lack of quality space available but consistent occupational demand. *IPD Monthly Index Globeside, Marlow Advised Invista on the sale of this urban business park in Marlow town centre. The scheme comprises four units plus a proposed development phase, with tenants including Telefonica UK, TNT Post and Icon Clinical Research. It was purchased by Threadneedle in December 211 for million reflecting a net initial yield of 9.84%. Centrum Business Park, St Albans Acting for Orchard Street Investment Management LLP, CT2 and CT3, Centrium Business Park was sold to CBREi for million, reflecting a net initial yield of 7.54%. Both buildings are let to Premier Foods Plc for a remaining lease term of approximately 7 years at a current passing rent of 1.7 million pa, reflecting 22.7 psf overall. 1 National Offices & Business Parks Survey Winter 211/212

11 Strutt & Parker New Speculative Developments & Refurbishments CGI Daytime View Point, Maidenhead Advising Kames Capital and Capella Estates on this iconic landmark development in Maidenhead town centre. The 78, sq ft nine storey building is due for completion in May 213. Flow, The Causeway, Staines Advising Rockspring and Exton Estates on this two building office development totalling 59, sq ft. Work will start on site in April with completion expected in May 213. Velocity, Brooklands, Weybridge Advising Rockspring and Exton Estates on this striking new development within the historic boundaries of the world famous Brooklands race track. The 13,593 sq ft, two building development is due for completion in November 212. Abbey Gardens, Kings Road, Reading Advising Hermes Fund Managers Ltd and Bell Hammer on the comprehensive refurbishment of the South Block comprising 76,735 sq ft over eight storeys. Works will start on site in February with completion in January 213. Hammersmith Grove, London W6 Advising Development Securities and Scottish Widows Investment Partnership on this 23, sq ft two building development, the first in Hammersmith for a decade. Building One comprising 15, sq ft is due for completion in April Hammersmith Road, London W6 Advising Peakside Capital and Mercer Real Estate Partners on the comprehensive refurbishment of this six storey building comprising 41,7 sq ft. Works are due to complete in February 212. National Offices & Business Parks Survey Winter 211/212 11

12 Strutt & Parker Key Occupational Transactions in 211 Oxford Business Park Advised Goodman on the off-plan pre-letting to Centrica of a self contained building comprising 81, sq ft at a rent of 22.5 per sq ft on a 17 year lease. New Square, Bedfont Lakes, Heathrow Advised Scottish Widows Investment Partnership on the letting of Building 1, Building 7 and Building 5 (part 2nd floor) comprising 66,543 sq ft at rents of 24. per sq ft and 25. per sq ft on 1 year leases. Market House, Maidenhead Advised Shepherd Developments and Durngate on the letting of two and a half floors comprising 48,788 sq ft to Adobe Systems at a rent of 29.5 per sq ft on a 12 year lease. 12 National Offices & Business Parks Survey Winter 211/212

13 CGI Maidenhead Office Park 2 Maidenhead Office Park One, Maidenhead Advised AXA Real Estate Investment Managers UK Ltd on the pre-letting of this self contained building comprising 5,798 sq ft to a confidential US pharmaceutical company at a rent of 23.5 per sq ft on a 1 year lease. Form 1, Bartley Wood Business Park, Hook Advised CIT on the letting of the first floor, comprising 33,2 sq ft to Alphabet (GB) Ltd at a rent of 19.5 per sq ft on a 1 year lease Hammersmith Road, London W6 Advised Stockland on the sale of this part let self contained building comprising 115, sq ft at a price of 38,75,. Arlington Business Park, Reading Advised Goodman on three lettings to Nedap, Wrigleys and Adtran totalling 21,75 sq ft at a rent of 26.5 per sq ft on 1 year leases. 3 Shortlands, Hammersmith Road, London W6 Advised Halcrow on lettings to Deltek, Diebold and Orega totalling 27,5 sq ft on various length leases at a rent of 32.5 per sq ft. Building 3, Arlington Square, Bracknell Advised Goodman on the letting of three floors comprising 34,53 sq ft on 1 year leases to Quantum Storage, AVNet and LANDesk at 18.5 per sq ft. National Offices & Business Parks Survey Winter 211/212 13

14 Map of Market Area A1M M5 M4 M1 M11 M4 M25 M3 A3 M23 M2 Definition of terms Size Both supply and take-up analysis excludes floor space under 5, sq ft. Take-up Occupational take-up. Taken at the point that an agreement becomes unconditional. This excludes developer land/building purchases for development and refurbishment. Quarterly Data Take-up is analysed on the basis of 3 month quarters. A snapshot of the market is taken at the end of each quarter. As additional data becomes available the graphs are updated each quarter. Grading Definitions Grade A New Brand new development or substantial refurbishment. This includes tenant disposals when tenant has never been in occupation. Grade A Second Hand High quality previously occupied accommodation. This includes minor internal refurbishments undertaken by Landlords. Grade B Medium to low quality previously occupied accommodation. Supply Floor space which is being marketed and is available for occupation. Speculative development under construction and due for completion during the year is included. Sector Analysis Business sectors have been grouped to identify market trends and within these groups, there are a number of sub-sectors. On average, 85% of the market is dominated by four key sectors as follows: Sector Computer/Electronics Services Telecoms Chemical/Pharmaceutical Sub-sector Hardware, Software, Internet, Support Services. Financial, Insurance, Business, Serviced Offices. Manufacturing, Service Provision. Manufacturing, Research, Clinical Trials. Commitment Type This analyses how occupiers commit to taking space and is broken down into four categories: land purchase; commitment off plan prior to construction or commitment during the construction of a speculative development and post completion. Disclaimer Every effort has been made to ensure that the information and statistics contained in this survey are accurate. We have relied substantially on information provided by outside sources and Strutt & Parker LLP takes no responsibility for any damage or loss sustained as a result of its content. No part of this report may be reproduced or transmitted, in any form or by any means without the prior written consent of Strutt & Parker LLP. January 212. Cover image: Velocity, Brooklands, Weybridge. A new speculative development by Rockspring and Exton Estates. 14 National Offices & Business Parks Survey Winter 211/212

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16 Simon Bland Head of National Markets Tel: +44 () Edward Smith Head of National Markets Office Agency Tel: +44 () Head Office 13 Hill Street, London W1J 5LQ Tel: +44 () Fax: +44 () City Office 1 Angel Court, London EC2R 7HJ Tel: +44 () Fax: +44 () Residential Commercial Farming Land Management Sporting Leisure and Hotels Development Professional Services