The national agency branch boss
The coalition government’s cull of the public sector might be expected to be more of a concern to property people operating in less affluent locations than leafy Surrey. But Paul Dowson, head of Lambert Smith Hampton’s Guildford outpost, argues that Surrey’s county town will not be immune to Britain’s era of austerity.
“Guildford is home to such bodies as the South East England Development Agency and the Government Office for the South East – organisations which are to be closed,” says Dowson.
He points out that SEEDA and GOSE between them occupy around 80,000 sq ft. “Relatively, occupancy here is not too heavily weighted towards the public sector, but it is around a quarter of a million sq ft out of 3.2m sq ft of total stock, so it’s a significant minority,” he says.
In the foreseeable future, Dowson reckons that around 120,000 sq ft of public sector occupied space will be vacated, the majority of which is in stock built around 20 years ago. He says: “It’s not a bad thing per se. It will provide opportunities to create new office space, although refurbishment will be a necessity.”
Dowson insists that the main focus of the market is private sector demand, and although patchy, occupiers are generating work for agents like him.
“We’re keeping busy. I have more than 100,000 sq ft of private sector office requirements under negotiation at the moment,” he says. “We are far busier now than we were this time last year, with lease re-gears, plus acquisitions and some investment work.”
Dowson is quick to point to Guildford’s availability figures, which LSH research shows have dropped from 343,000 sq ft to 255,000 sq ft during 2010, with only 3,000 sq ft of prime space available in the town.
“The agency market is still incredibly difficult,” he says “but grade A stock is definitely diminishing.”
The London-based M25 agent
Will Foster, a partner in Knight Frank’s South East offices team, admits that, as well as having its hot spots, much of Surrey’s market is performing poorly. “The area to the north-west of the county – towns such as Camberley and Frimley on the M3 corridor – remains tough because of limited take-up,” he says. “Demand in that part of Surrey is historically dominated by technology companies, and they are not employing as many people as usual.”
A recent investment deal which Foster admits was “less than joyful” for the market, was last month’s sale of the 37,000 sq ft Sabre building in Camberley, which Aviva sold to charity ACT Foundation for £2.4m. At the top of the market, Foster says, Aviva could have expected as much as triple that figure.
Leaping to the county’s defence, Foster argues that core towns, such as Guildford and Weybridge, remain some of the M25’s better-performing locations, with rents generally maintained. He points to cruise operator Royal Caribbean taking 28,000 sq ft at PRUPIM’s The Heights in Weybridge last September for a top-of-market rent of £28.50 per sq ft.
“The market has held up in those towns because of a more diverse occupier base, more limited supply in the first place due to stringent planning, and bluntly, they are the prettier areas of the county. They are attractive to managerial-level staff,” says Foster.
The regional agent
Selling office space in new developments is not an activity that many agents in Surrey need worry about at the moment.
But Wadham & Isherwood, a local agency headquartered in Guildford, has been instructed, alongside CB Richard Ellis, to find tenants for 50,000 sq ft of offices which are being built alongside 500 Barratt flats at Woking’s New Central scheme. Developer Connelly Crowther & Hofbauer is on site, and the offices will be completed by the first quarter of 2012.
“It is probably the only speculative development under construction in Surrey, and should capitalise on the scarcity of brand new grade A space available,” says Peter Da Silva, director with Wadham & Isherwood.
But Da Silva admits that occupiers are not blazing a trail into the county. “The market is patchy’” he says.”It was like that for most of 2010, and I suspect it will continue. Enquiries are lease event-driven, and I can’t think of any recent inward investors.”
For agents like him, says Da Silva, perseverance is necessary. “When there is a wave of enquiries, you need to make the most of them, be they for 1,000 sq ft or 10,000 sq ft, because if you don’t get instructed on them, the market can go quiet,” he says.
Landlord-based work remains challenging, admits Da Silva, as occupiers continue to expect huge incentives. Two years rent-free on a 10-year lease is still routinely expected by tenants, he says.
“It’s hard graft, but there are deals to be done,” insists Da Silva.
The Croydon agent
Working day-to-day in Croydon, a town which the council and various developers have, for cycles, been promising to furnish with modern business stock, must be frustrating.
But Neil Barker, director with Stiles Harold Williams, insists that the lack of prime stock in the town has not killed off the market. According to SHW, take-up last year was 153,000 sq ft – not significantly below the recent 10-year average of around 200,000 sq ft.
“We are optimistic. This year will be similar to last year in terms of demand,” predicts Barker.
Croydon’s commercial property market has nearly run on empty for a number of years in terms of grade A office space, but Barker argues the town has enough pulling power to attract occupiers into its better quality stock.
This is not a town completely dependent on churn, he says, referring to insurance firm Zurich taking 15,000 sq ft when it relocated from nearby Sutton.
“Croydon is always viewed as an insular place, but we’ve had new blood,” says Barker.
But the town does face challenges. A significant chunk of its older stock is occupied by public sector tenants – an occupier base which looks increasingly precarious, given the coalition government’s public spending cuts.
Barker says: “The departments can’t be completely culled. Some of the space that will be handed back is obsolete anyway, and is unlikely to remain in use as office space.”
Perhaps more worryingly, local big-hitters such as confectionery giant Nestlé, which has been based in the town since 1965 (see p84), need to upgrade their offices but face an acute shortage of space.
However, Barker has faith that Croydon’s “proactive” council leadership under Jon Rouse will do all it can to keep businesses such as Nestlé in the town by promoting long-awaited regeneration. He says: “The council realises that Croydon missed the cycle, and that it can’t happen again.”
