Following a good 2005, the Brighton market is experiencing the fall-out of a major relocation. Legal & General took 196,000 sq ft at Mountgrange’s City Park in Hove, but has vacated 90,000 sq ft in the city. BT has also vacated 100,000 sq ft. According to Chris Broome of Cluttons, this puts available space at 450,000 sq ft – equivalent to around three years’ take-up.
However, he points out that rents have just hit £21 per sq ft for new space – the highest since the 1990s – and the two vacated buildings offer fairly good-quality space at £10 per sq ft.
There is little grade-A space available until two schemes come to the market. First is 50,000-60,000 sq ft planned as part of the New England Quarter, a mixed-use scheme next to the railway station due to be completed in around 18 months. Second is the Grow Brighton mixed-use scheme, which will have around 160,000 sq ft of offices split between corporate-style small freehold units and incubator/serviced offices.
Cathedral Group is the preferred developer for the £0.5bn 10-year project. The first phase is expected on the market in November 2008.
Elsewhere in the county, little grade-A space is available. Rents in Crawley have now stabilised at £24 per sq ft, says Will Foster of Jones Lang LaSalle.
Surrey has a “chronic undersupply” of grade A space, says Foster. Larger requirements, such as that from Unilever, which is looking to consolidate its south-west M25 offices into one building, have resulted in a prelet. The firm has 150,000 sq ft in solicitors’ hands at Landid’s Leatherhead Business Park at a rent of more than £25 per sq ft.
There is evidence of rental growth in Woking and Reigate, says Foster. He cites Midas Court, Woking, where a recent letting to Menzies has achieved £23 per sq ft – £1 per sq ft more than was achieved previously.
“There is dwindling supply, and a lot of towns have got compact centres or are constrained by the green belt,” says Foster. “It is a challenge to find where the next wave of development will come from.”
Vacancy is less than 5% in the M25 south-east quadrant. Emma Goodford, partner at Knight Frank, says there are three or four unsatisfied requirements for more than 50,000 sq ft, and developers building small units are finding some of them letting before completion.
“There is a very good case for speculative development in well-located parks,” says Goodford.
A new source of demand is disaster recovery. Canary Wharf, a traditional location for the sector, is starting to look a bit expensive.
There seems to be ample development opportunities. Many established parks – for example, Quadrant Estates and Trinity College’s Eureka Park at junction 9 of the M20 near Ashford, and Kings Hill business park – have land to develop.
Longer term, there are Crossways at Dartford and Ebbsfleet, Kent Thameside, where some 3m sq ft of offices is earmarked for development.
“We should see some rental movement,” says Goodford. “At Kings Hill, for example, we are now quoting £23 per sq ft.”
She predicts activity in Maidstone, where many buildings date from the 1960s and 1970s. “Now, £23-£25 per sq ft will easily be achieved in Maidstone for new space,” she says.
|
|
|
Surrey, Sussex and Kent are still high on investors’ shopping lists. Demand for good-quality stock seems to be as hot as ever, driven by the weight of money. Mark Holliday, senior director of capital markets at CB Richard Ellis, says prime office buildings are fetching yields between 5.25-5.5%. However, he remains cautious: “The secondary market is a bit more dangerous with swap rates moving out.” But that is not to say investors should avoid secondary stock. Holliday points out that you need to be confident about the building’s quality and location when buying. Overall, the outlook is very positive. |
|
Sussex availability, rents and take-up Two schemes in Brighton will provide up to 220,000 sq ft of grade A office space over the next two years |
|
|
|
|
|
|
|
Source: CB Richard Ellis |
|
Surrey availability, rents and take-up Supply of new space is dwindling in most towns |
|
|
|
|
|
|
|
Source: CB Richard Ellis |
|
Kent availability, rents and take-up Vacancy rates are low, and increasing demand is lifting rental levels, particularly in business parks |
|
|
|
|
|
|
|
Source: CB Richard Ellis |
