Development opportunities in South East offices
CBRE is confident that there is potential for rental growth in the Thames Valley and M25 offices market this year, driven by the rent and terms achieved on new speculative developments. While the firm does not expect any change in the general drivers of demand in this market, and therefore a similar level of take-up to 2012, it feels 2013 “will be a good year for developers who have taken an early speculative risk”.
Seven schemes are due to complete in the region this year, adding a total of around 500,000 sq ft of prime office space to supply; but the firm notes that occupiers are continuing to seek the best quality space, driving the continued trend towards a smaller supply of prime stock. Occupiers have realised, says CBRE, that their best asset is their employees, so despite their cautious outlook – set to continue until there is more clarity in the macroeconomic situation – they are upgrading their office space in order to help them retain or attract staff and to increase productivity.
CBRE notes that prime supply in the Thames Valley and M25 offices market has shrunk on average by 14% a year since 2010. “This pipeline to replace stock is therefore still well below what is needed to replenish supply and is very low by historic standards,” it notes.
Transactions in the 10,000 sq ft to 30,000 sq ft range are set to dominate this year, with a continued lack of larger strategic requirements. Last year, deals of this size accounted for 49% of all floorspace exchanged, the firm notes.
