Western Corridor office rents

Citation

(1998), "Western Corridor office rents", Property Management, Vol. 16 No. 3. https://doi.org/10.1108/pm.1998.11316cab.001

Western Corridor office rents

Western Corridor office rents

Keywords Office space, Rent

Grade A rents in the Western Corridor saw a dramatic rise in 1997, according to the latest research from international property consultants Hillier Parker. Continued demand and a shortage of supply is set to see further rental growth in the next 12 months.

Throughout 1997 the Western Corridor remained under-supplied with top quality office space, with a particular shortage of buildings able to meet the needs of the larger occupier. Despite limited supply, the level of speculative development remained low during the first three-quarters of 1997.

However, during the final quarter, speculative development saw a dramatic increase, with a total of 127,900 m² (1.38 million sq. ft) underway by the end of the year.

"With a construction period of up to 18 months, this development will not feed through into effective supply until the end of 1998 and into 1999. Given the shortage of available stock, a number are expected to be let prior to practical completion", said Deborah Savin, Business Space Analyst at Hillier Parker.

Hillier Parker's research indicates that the majority of speculative development remains restricted to the stronger office markets such as Slough, Bracknell, Reading, Maidenhead and the Heathrow area. Almost half of total take-up during 1997 took place in these markets (Table I).

Mark Routledge, of Hillier Parker's Western Corridor Agency team, commented: "Faced with the current shortage of existing space, a long-term view of property requirements is paramount. If an occupier can anticipate the need to relocate 12 to 18 months in advance, the choice of building and location available to them will increase dramatically. It is also likely that by agreeing a pre-let, a transaction can be concluded on significantly better terms".

The four largest transactions during 1997 were freehold acquisitions, two of which involved site sales. With lease terms lengthening, site purchase is increasingly viewed as a more flexible approach by major occupiers, allowing for further expansion should business performance dictate.

According to Hillier Parker, those occupiers restricted by time and therefore forced to acquire existing space, are increasingly finding themselves in competition for the better buildings. Even if demand does not see an increase during 1998, this competition will continue to produce rental growth in prime locations over the next 12 months.

The average Grade A rent achieved in 1997 was £237 per m² (£22 per sq. ft), a 19 per cent rise above the average of £200 per m² (£18.50 per sq. ft) achieved in 1996.

The largest increases in prime rental values over the year were seen in Slough (23 per cent), High Wycombe (23 per cent), Camberley (19 per cent) and Bracknell (18 per cent). Excluding High Wycombe, these locations are some of the few to have seen take-up of new space in the last 12 months (Table II).

Availability remained broadly static throughout 1997. However, a sharp rise in the number of small second-hand units on the market masked a fall in the supply of larger stock.

Of the total available stock, 38 per cent is Grade A space. However, with only three Grade A buildings of over 5,000 m² (53,800 sq. ft) currently available, there is a continued shortage of quality space able to meet the needs of the larger occupier (Table III).

Hillier Parker comment that a change in the pattern of deals saw take-up of space in units of over 10,000 m² (107,600 sq. ft) increase by 65 per cent in 1997, with fewer transactions at the smaller end of the market.

Total take-up in 1997 reached 284,700 m² (3.06 million sq. ft), slightly below the 292,800 m² (3.15 million sq. ft) let or sold in the previous year. There were 82 transactions in 1997, compared with 101 in 1996.

Of the total space transacted, 62 per cent was accounted for by the hi-tech companies. Foster Wheeler's acquisition of 27,400 m² (295,000 sq. ft) at Shire Hall, in Reading, in March, meant a further 12 per cent was accounted for by the utilities sector (Figure 1).

Figure 1 Western Corridor office market prime office rents