Undersupply to spur office centres – Knight Frank rental growth in key Thames Valley
Knight Frank says the Thames Valley is leading the recovery in the market for available office space in South East England, and the ICT sector is driving this growth. At the firm’s M25 Office Market Research breakfast at the Dorchester in London this morning, Knight Frank’s head of South East Offices, Emma Goodford, said: “ICT is really on the charge again and will drive forward the recovery of the South East market, focusing on the Thames Valley area.”
“My colleagues at Newmark Knight Frank in Silicon Valley tell me the market is buzzing,” she added. “I anticipate the explosion of wireless communication will increase the demand from the ICT sector and forecast that, within 12 months, this sector will account for 50% of take-up in the Thames Valley region.” Knight Frank also notes that new market entrants from Asia such as Huwawei and HTC are also expected to drive expansion.
In the M25 region, Knight Frank says take-up reached 452,000 sq ft in the first quarter of this year, which is 15% above the previous year’s level but still 30% below the ten-year quarterly average. By contrast take-up in the M4 office market at 415,965 sq ft was a huge 82% above Q1 2010 and also above the long-term average.
Demand for office space in the Thames Valley area has focused on new and Grade A properties, which accounted for 92% of take-up over the past year, above the average of 79%. Out-of-town space has also been popular as the market recovers, making up 64% of Thames Valley take-up over the past 12 months. “Active occupiers are demanding large floor plates, car parking, security and profile which town centres sometimes cannot provide,” the firm notes. The vacancy rate for new and Grade A stock is 5.5% and is expected to fall to 4.1% by the end of 2013.
Knight Frank says there is a “looming supply and demand imbalance” in many key towns in the Thames Valley area, including Richmond, which has just 0.9 years’ supply of new and Grade A space, Uxbridge (1.2 years), Staines (1.8 years), Hammersmith (2.7 years) and Chiswick (1.4 years).
The firm says the case for speculative development in these centres is clear and also supported by headline rents. But just 1.4m sq ft of new completions are forecast by the end of 2013 – just eight months’ supply. Of this, 90% is in key Thames Valley towns. Emma Goodford says the potential lack of supply will lead to rental growth in the most active but undersupplied centres – Knight Frank’s top picks for rental growth include Maidenhead, Uxbridge, Reading, Staines and Guildford.
