Take-up of 263,000 sq ft by May this year against last year’s total of 750,000 sq ft bodes well for the Thames Valley market.
However, with demand now slackening, Guy Parkes, head of Thames Valley at Rogers Chapman, says he expects the year to end only “slightly up” on 2005’s figure.
Vacancy rates hovering at the 15% level — albeit down from a high of 30% — have all but put a brake on development. However, some schemes are going ahead.
For example, AMEC is developing its 11-acre Chatham Place scheme, which includes 360,000 sq ft of offices, on the outskirts of Reading town centre.
Meanwhile, rents on refurbishments are at “slight discount” to grade A levels of £24 per sq ft.
Overall rents around Reading and Bracknell will rise to £26 per sq ft by the end of this year, says Parkes.
According to Lambert Smith Hampton’s M1 corridor office market review, office take-up in Milton Keynes reached 290,000 sq ft last year, slightly more than in 2004.
Supply of larger floorplates is now dwindling, says Holly Dawson at Lambert Smith Hampton, with 490,000 sq ft of grade A space still on the market.
“Activity in the secondhand market will continue because pipeline development won’t be completed until 2007,” she says.
Rents have increased to £16.75 per sq ft but this has not risen further because of a lack of deals.
Agents for the office element of Frontier Estates’ 50,000 sq ft The Hub in Milton Keynes are quoting £18 per sq ft, says Dawson.
“That would be ground breaking for central Milton Keynes, ” she says.
LSH expects rents to rise modestly to £17 per sq ft by the year end.
Oxfordshire’s supply is tight. Lettings last year were in line with the long-term average of 250,000 sq ft pa and, in the first five months of this year, 100,000 sq ft of space has been taken in five deals.
Yet agents remain puzzled by the signs. Richard Stansfield, Savills’ director in Oxford, says: “This could be a spaceless recovery. The first four months of the year have been extremely quiet. Our new enquiries are down by a third on 2005.”
But deals have been done. For example, Oxford Science Park is at full capacity following a 56,000 sq ft deal to medical technology company BD last month.
Prelets are also steady, with internet registry Nominet taking 25,000 sq ft on Oxford Science Park.
In the city, Park Central, the only new space in Oxford for 15 years, set a new headline rent of £21 per sq ft with a 21,000 sq ft letting.
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Stock in Oxford is an issue. Arlington considered trading Oxford Business Park but has since decided to retain it. In the city centre, Hartwell Holdings recently sold Seacourt Tower to LXB Property Partners and Arlington. It asked for bids of more than £70m, representing a yield of 5%.The final price is not known. Yields of 5.8% are common, and Richard Stansfield, director at Savills, does not expect further compression. “Investors are pausing. There is a realism about rental growth,” he says. In Milton Keynes, portfolio sales led Q1, although individual sales also surged. The Omron building at Eastlake Park in Fox Milne achieved one of the keenest yields at 6.3% when Peterhouse College, Cambridge, paid £4.45m for the 23,000 sq ft building. |
