The domino effect

As available space is taken up at one end of the Thames Valley, research shows that occupiers are starting to move further down the line. By Kerry Ezard High demand for office buildings in the Thames Valley has kept rents high and supply tight. As hotspots struggle to match demand with supply, opportunities for towns further along the M4 corridor, such as Swindon, could arise. Reading and Bracknell continue to thrive – a number of new developments are either under construction or in the pipeline. A recent survey by MWB BusinessExchange, in association with City University Business School and Actium Consult, shows the true cost of occupying office space in the Thames Valley as opposed to central London. Taking into account the total cost of office occupation per employee, the survey revealed the figure to be £10,454 in Reading, compared with £18,682 in the West End of London. Total available new space in the Thames Valley region has decreased steadily between 1999 and 2001 and today stands at 139,356m2 (1.5m sq ft). But total available secondhand space has experienced a steady increase and now stands at just over 464,515m2 (5m sq ft), according to figures from Knight Frank. Figures from Insignia Richard Ellis show that a number of pipeline development schemes are planned for both Bracknell and Slough. The largest of these schemes is the 41,807m2 (450,010 sq ft) former EMI site on Blyth Road in Bracknell. The existing buildings on the site are expected to be refurbished as either offices or a telecommunications centre. But staffing issues are causing problems. Lambert Smith Hampton’s occupier research finds that 46% of Thames Valley occupiers were finding it difficult to recruit staff, with towns such as Bracknell and Newbury having near 0% unemployment rates. The staffing issue is exasperated by commuting congestion problems and an expensive and scarce housing stock. This may expaline why the region’s occupiers are so keen to increase home working. Lambert Smith Hampton’s survey found that 58% of companies will encourage home-working by 2002 and 15% of companies expect over half their staff to be working from home in two years’ time – a three-fold increase. The supply of new units over 1,858m2 (20,000 sq ft) in the Thames Valley was 174,193m2 (1.88m sq ft) in March, the same as the previous year. However, this dipped to 116,129m2 (1.25m sq ft) in September 2000 when the majority of supply came from refurbished buildings. The trend of an increasing supply of refurbished buildings can be seen clearly in figures from Jones Lang LaSalle. The supply level of refurbished units over 1,858m2 (20,000 sq ft) was 58,064m2 (625,000 sq ft) in March 1999, a figure which had risen to 110,369m2 (1.19m sq ft) by March 2001. Reading Arlington Business Park in Reading has recently secured two lettings at its 9,389m2 (101,062 sq ft) Waterside development. Vodafone, which already occupies two properties on the park, has taken 3,552m2 (38,233 sq ft) at a rent of £312 per m2 (£29 per sq ft). The second letting has gone to US-based software company e.Piphany, which will occupy 1,742m2 (18,751 sq ft) at a rent of £318 per m2 (£29 per sq ft). Figures from Vail Williams show 2000 to have been a record-breaking year for take-up in Reading, even after excluding the Cisco and MCI Worldcom deals. Lambert Smith Hampton’s Nick Cooke says that Great Bigham’s Mead development will set record rents of £323 per m2 (£30 per sq ft). Bracknell Bracknell is continuing to enjoy a high level of activity, with several new schemes either under construction or in the pipeline. Arlington Square leads the way with the expansion of the 8,128m2 (87,849 sq ft) Business Centre, developed by Arlington and Regus. Joining occupiers Novell, Honeywell and the Whitbread Travel Inn is Building 3, under construction, which comprises 6,317m2 (67,996 sq ft) over three storeys. Completion is expected for mid-October. The serviced office provider MWB BusinessExchange has acquired the 9,569m2 (103,000 sq ft) Atrium Court in Bracknell. The site is expected to open in July after a full refurbishment. Three floors have already been let to IT company See Beyond. Lack of stock has seen secondhand rents hit £301 per m2 (£28 per sq ft), according to Lambert Smith Hampton. Further development is planned for Bracknell’s Willoughby Road, where a 3,159m2 (34,000 sq ft) scheme is under construction at Viewpoint 1 (see table, p130). Lack of stock has seen secondhand rents hit £301 per m2 (£28 per sq ft), according to Lambert Smith Hampton. Swindon One town that is becoming more attractive to investors is Swindon. In the past, developers have tended to bypass Swindon in favour of towns closer to Heathrow Airport. Simon Kingsley of Alder King puts this down to overseas influence. Although Swindon was previously perceived as being too far out, if supply remains tight in other towns developers are likely to be attracted by the significantly lower rents that Swindon has to offer. Speaking of Swindon’s future growth potential, he says: “A company’s decision to move to Swindon may not necessarily be dependent on what Swindon has to offer but, rather, on the lack of supply elsewhere.” One problem that could hamper Swindon’s future growth is its rapidly diminishing availability of employment land. According to figures from Alder King, the total available supply has steadily decreased from some 119 different sites in 1990 to just 33 last year. Slough Slough is enjoying a similar level of activity to Bracknell in terms of high-tech inward investment, although availability in Slough is slightly higher. Slough Estates is planning two further schemes on Bath Road. Construction of a 5,574m2 (60,000 sq ft) site is due to begin this month and, further along the road, preletting opportunities are being sought for a 7,432m2 (80,000 sq ft) scheme. Grosvenor Estates has recently received planning permission for a 4,552m2 (49,000 sq ft) development in the High Street. One of the largest immediately available buildings in Slough is Thames Valley Court on Bath Road. The 7,239m2 refurbishment, covering three floors, has been developed by Threadneedle Investments – agents are Saxon Law and Jones Lang LaSalle – and commands rents of £338 per m2 (£31 per sq ft). Also available on Bath Road is Aquasulis, which is 2,355m2 (25,349 sq ft). The fully refurbished building, which is developed by Morley Fund Management, Saxon Law, Edwin Hill and Croft, has a rent of £344 per m2 (£32 per sq ft). Charles Rowton of Lambert Smith Hampton says that enquiries are down. Maidenhead There are several development schemes in the pipeline for Maidenhead, where Argent is about to start building a 13,192m2 (142,000 sq ft) development at The Forbury, Forbury Gardens. The completion date is early 2003. Castlemore has recently purchased the 2,787m2 (30,000 sq ft) Henly’s Garage site in Maidenhead. Longford Business Centres is planning further developments in the Thames Valley. A new 1,858m2 (20,000 sq ft) centre is to open in June on Moorbridge Road in Maidenhead. Lambert Smith Hampton’s Cliff Jackson says that take-up exceeded 278,700m2 (300,000 sq ft) in 2000 and that there is virtually no good-quality secondhand stock available. Dominic David, joint managing director of Longford Business Centres, says: “The company is pursuing a number of properties in the area. Demand for flexible office space remains high in the Thames Valley in spite of the uncertainty in the technology sector.” Newbury According to MWB BusinessExchange’s Philip Newborough, Newbury is not as strong a player in the office supply market as other towns in the Thames Valley region. Vodafone is the most significant recent development, and has a large proportion of recent take-up in the town. However, Newbury could see an increase in activity with the development of the Greenham Common industrial and office park. Rents will be half those in other towns in the Thames Valley. Lambert Smith Hampton puts prime rents at £ 215 per m2 (£20 per sq ft). Windsor There is a severe shortage of properties to meet increasing demand. There have been no new developments since Centrica AA’s occupation of Windsor Business Park. Any further developments in Windsor are likely to be refurbishments of town-centre offices. Conclusion Although demand continues to be strong in the Thames Valley office market, the future could become bleak if the new economy takes a turn for the worse. Rogers Chapman’s Guy Parkes warns that hi-tech companies in the US are suffering hard times, with a loss of half of all dot.com and other technology companies. This could mean that repercussions are felt here in the future and that the boom in the Thames Valley could turn to bust. Top grade A office rents (£ per sq ft) Hounslow has seen the greatest rent increases 1998 1999 2000 % Change 99/00 Uxbridge £26.40 £26.50 £27.50 3.8 Ealing £20.00 £22.00 £22.00 0.0 Hammersmith £32.00 £32.00 £35.00 9.4 Heathrow £32.70 £34.00 £35.00 2.9 Hounslow £21.00 £22.50 £28.00 24.4 Staines £27.50 £30.00 £34.00 13.3 Slough £27.00 £32.00 £32.71 2.2 Maidenhead £29.50 £30.00 £35.00 6.6 Camberley £21.00 £25.00 £25.00 0.0 Bracknell £26.50 £27.00 £29.00 7.4 Basingstoke £18.50 £19.50 £19.25 -1.3 Reading £28.00 £28.50 £32.50 14.0 Source: Rogers Chapman Top grade B office rents (£ per sq ft) Strong activity has pushed up secondhand rents in Bracknell 1998 1999 2000 %Change 99/00 Uxbridge £21.33 £22.00 £22.00 0 Ealing £17.75 £18.25 £22.00 20.5 Hammersmith £23.00 £25.00 £29.00 16.0 Heathrow £22.50 £26.50 £27.50 3.8 Hounslow £25.20 £25.20 £24.00 -4.8 Staines £20.00 £25.00 £28.00 12.0 Slough £20.40 £22.50 £27.50 22.2 Maidenhead £23.00 £24.00 £25.00 4.2 Camberley £19.50 £22.50 £25.70 14.2 Bracknell £17.35 £18.50 £28.50 54.0 Basingstoke £17.95 £18.00 £17.50 -2.7 Reading £22.00 £25.75 30.00 16.5 Source: Rogers Chapman Key office transactions (£ per sq ft) The most recent deals were in Reading Address Size (sq ft) Tenant Rent (£ per sq ft) Green Park, Reading 607,000 Cisco 28.00 Reading International B/P, Reading 394,996 MCI WorldCom 28.00 Green Park, Reading 280,000 Veritas Software 30.50 Windsor Office Park, Windsor 116,254 Centrica 32.50 100 Square, Bracknell 102,860 MWB Business Exchange 23.80 Chiswick Park, Chiswick 100,000 XO Communications 30.00 Hayes Park, Hayes 70,655 Heinz 29.50 Turner Building, Slough 85,500 Reckitt Benckiser 30.50 Hayes Park, Hayes 45,845 Fujitsu Europe 29.50 Integra II, Egham 46,000 Hyperion 33.25 Eastworth House, Chertsey 50,980 Fibreway 25.00 27 West, Brentford 56,605 Interex 28.00 Compass Point, Staines 69,200 BP Amoco 29.30 World B/Centre, Heathrow 66,212 Amadeus 30.00 208 Bath Road, Slough 50,000 Celltech Group 28.00 Wellcroft House, Slough 48,000 Infobank 28.50 Arlington B/Park, Theale 44,000 Content Technologies 28.50 Source: Rogers Chapman Office take-up (000s sq ft ) Take-up increased last year 1998 1999 2000 West London Grade A 1,788 1,237 2,092 Grade B 453 510 633 Grade C 347 217 198 Total 2,588 1,964 2,923 Thames Valley Grade A 948 1,483 2,346 Grade B 626 943 678 Grade C 323 283 209 Total 1,897 2,709 3,233 Whole region Grade A 2,736 2,720 4,438 Grade B 1,079 1,453 1,311 Grade C 670 500 407 Total 4,485 4,673 6,156 Source:Rogers Chapman Thames Valley availability Pockets of opportunity for developers still exist in the Thames Valley Landlord Size (m2) Landlord Comments Quoting rent (£ per m2) Existing buildings (complete) Lily Hill House, Hill House, Bracknell 2,818 Knowle Bracknell Completed January. Part country house 296 Hayes Park, Hayes 5,946 Tishman International Believed to be under offer to United Biscuits 323 1 Heathrow Boulevard, 286 Bath Road, Heathrow 2,872 News International Assignment/sublet 285 (passing) Marlow International Business Park, Marlow Up to 20,900 Akeler Developments Building has been substantially refurbished to create separate entities 344 Matrix, Globe Park, Marlow 7,432 Tektronix Secondhand – refurbished. Former Tektronix building 323 H2O, Thames Valley Park, Reading 6,224 Transco Assignment of existing lease to 2026 with break in 2015 269 (passing) Great Brighams Mead, Reading 7,896 McKay Securities Completion summer 2000. Good interest 350 Millennium House, Thames Valley Park, Reading 6,875 ICL Assignment/sublet. Lease expiry in 2012 240 (passing) St Martins Place, 51 Bath Road, Slough 2,975 Computer Associates Secondhand. Assignment of lease expiring 2017 237(passing) Thames Valley Court, 183-187 Bath Road, Slough 7,246 Threadneedle Formally Computer Associates. Full refurbishment 345 Bourne & Rourke House, Watermans Park, Staines 3,805 United Biscuits Secondhand, adjacent to Staines Bridge 355 210 Winnersh Triangle, Winnersh 5,946 Slough Estates Secondhand. Refurbishment under way, to complete this month 269 220 Winnersh Triangle, Winnersh 4,225 3 Com Secondhand building 233 Buildings under construction Viewpoint One, Willoughby Road, Bracknell 3,159 Hardcastle Available this autumn Arlington Square, Bracknell 6,317 Arlington/Regus Completion October. Believed to be under offer to Fujitsu Siemmens Aria, 80 Oxford Road, High Wycombe 4,092 Salmon Harvester/ Legal & General Available October. Quoting £296 per m2 Axis Park, Langley 9,290 MEPC The remainder of the site will be for industrial-type use. Completion this summer Vanwall Business Park, Maidenhead 4,924 Frogmore/Morley Due for completion July and March 2002 Globeside, Marlow 8,640 Development Securities/ Hill Samuel A further 10,220m2 is also available to prelet. Interest in one building Aquasulis, 10-14 Bath Road, Slough 2,323 Morley Due for completion in December Artemis House, 219 Bath Road, Slough 5,202 Legal & General Refurbishment due to be completed end 2001 New Century House, Hatfield Road, Slough 6,131 Deepwood Properties Available end 2001 to shell and core. Available in part Salamanca, Slough 6,131 Castlemore Due for completion. Quoting £376 per m2 Rivermead, Uxbridge Park, Uxbridge 3,902 MEPC Available this summer UB1, Vine Street, Uxbridge 5,388 RREEF/Terrace Hill Due for completion mid-2002 /Rouse Kent Capital Court, Cross Street, Uxbridge 5,202 Capital & Counties Recently commenced development. Available early 2002 55-57 High Street, Windsor 3,344 Merseyside Pension Trust Completion February 2002 Development pipeline 2-5 Arlington Square, Bracknell Up to 18,580 Arlington/Pricoa Remainder of site available to prelet 1 Thames Valley, Wokingham Road, Bracknell 6,039 Akeler Awaiting decision and detailed planning Viewpoint 2, Willoughby Road, Bracknell 4,645 Hermes Second phase of development. Phase one under construction Former EMI site, Blyth Road, Hayes 41,806 Resolution Properties May be refurbished as offices or telecoms centre. Known as The Hub Phase two, Vanwall Business Park, Maidenhead Up to 5,760 Frogmore Phase one under construction Henly’s Garage site, Maidenhead Up to 2,787 Castlemore Site purchased by Castlemore The Forbury, Forbury Gardens, Reading 13,192 Argent About to start construction with completion scheduled early 2003 South Bucks site, Chalvey/Windsor Roads, Slough 8361 South Bucks district council Site to be sold mid-2001 Landmark Place, Windsor Road, Slough 6,410 Frontier/Grainger Trust Proposing speculative construction of mixed-use scheme Faraday Court, Farnham Road, Slough 4,181 Hardcastle Group Likely to start speculative construction with construction commencing April 2001 200 Bath Road, Slough 5,574 Slough Estates Proposing to start construction this month 250 Bath Road, Slough 7,432 Slough Estates Seeking preletting opportunities on this site 25-40 High Street, Slough 4,552 Grosvenor Estates Recently received planning consent Phase three, Stockley Park 46,450 Stockley Park Consortium Construction due to commence on two buildings of 6,690m2 and 8,360m2. 6,690m2 under offer to HQ Business Centres One Hillingdon Circus, Uxbridge 7,432 Royal & Sun Alliance Prelet required Source: Rogers Chapman