M25 offices market to become more polarised in 2012 – Knight Frank
Knight Frank expects occupier activity in the market for office space in the M25 region to be largely driven by lease events this year, as opposed to business growth. For 2013-2015 the firm expects a spike in lease event-driven demand as historic leases expire. It says this, together with a firmer economic recovery, should provide a boost to activity.
The firm’s latest research into the M25 offices market is forecasting 2012 take-up in the M25 and M4 corridor to be broadly consistent with 2011, at 2.1m sq ft and 1.5m sq ft respectively. In the M3 region, Knight Frank forecasts lower take-up of 600,000 sq ft this year, as the principal occupier sectors of communications and IT are still in consolidation mode.
The focus of 2012 activity is expected to remain in the more resilient locations, such as Hammersmith, Maidenhead and Reading. “We also anticipate heightened activity in Bracknell, given the competitive pricing of a range of good-quality accommodation,” Knight Frank adds.
Turning to rental growth for the region, Knight Frank expects certain markets with strong fundamentals to continue to show growth in 2012 as Grade A supply diminishes, but rents and incentive packages are forecast to remain under pressure in secondary locations as rental performance becomes more polarised. The recent re-emergence of new developments also reflects this market polarisation, the firm adds: about 500,000 sq ft of new developments and refurbishments started in the final quarter of 2011 and a further 450,000 sq ft is expected to proceed in the first quarter of this year. Knight Frank notes this development activity is confined to prime locations such as Chiswick, Hammersmith, Maidenhead and Uxbridge.
Certain key centres will be undersupplied with new and Grade A space by the end of 2012, Knight Frank says. It feels that developers and landlords can benefit from considering opportunities for refurbishment in these locations, given the cost and timing advantages over new-build development.
