Many South East office occupiers are on hold – CBRE
Take-up of office space in the Thames Valley and M25 region in the first half of 2012 reached 1.05m sq ft, says CBRE, 37% below the figure for the previous six months but on a par with total take-up in the first half of 2011. Take-up in the second quarter was 648,470 sq ft following a Q1 total of 403,163 sq ft.
The Thames Valley submarket was again the strongest, accounting for 70% of take-up across the region, at 739, 474 sq ft. This figure was, however, well below the long-term average for the half-year of 1.3m sq ft and also a third less than the total for the second half of 2011.
The firm says the second half of this year is not expected to see the same rally in deals that was experienced in H2 2011 – there is a lack of larger deals and enquiries and the eurozone crisis “has undoubtedly affected occupier confidence” in the South East office market, CBRE says. “Many of the enquiries we are seeing are in a ‘holding pattern’ as nervous tenants and occupiers wait to see what becomes of the wider global and European economic situation,” it adds.
Within the Thames Valley market, office space in West London has been in demand, with a total of 399,425 sq ft exchanging in this area across eight deals during the first half and another 302,000 sq ft of floorspace under offer across 10 deals.
Demand across the M25 North area remained subdued with take-up reaching 181,107 sq ft, up 9% from the second half of 2011 but 53% below the long-term half-yearly average of 388,869 sq ft. CBRE notes that while take-up from public-sector occupiers accounted for 23% o the floorspace transacted in this market during 2005-2010, this figure fell to just 3% during 2011 and so far this year no deals have completed from this sector.
Take-up in the M25 South market was very low in H1 2012 with just five deals of more than 10,000 sq ft, totalling 131,052 sq ft. The firm has noted a more cautious approach from occupiers in the professional sector since last year.
There are eight buildings currently under construction in the region and a further two were completed earlier this spring, but total available space has fallen 3% to 16.2m sq ft, with ready-to-occupy stock accounting for 15.6m sq ft of this total and only 19% of this figure made up of Grade A office property. CBRE says this continues the squeeze on good-quality available office space in the Thames Valley and M25 region that has been seen since Q1 2009. Many tenants of offices in the Thames Valley and M25 area may need to move quickly as their lease expiries loom, CBRE says, with around 14.3m of breaks and expiries due across the region in the next three years.
The expected continued demand for high-quality stock and the falling supply of Grade A office space has led to some speculative developments in the region during the past 18 months. “On the back of the recent success of speculative developments in Chiswick, it seems that fortune favours the brave,” the firm notes.
