South Coast Office Market Pulse Q1 2018

The South Coast office market has had a challenging start to 2018 with the lowest quarter of take-up (27,287 sq ft) recorded in the last 5 years.

Enquiry levels however did recover and were 20% higher than those received in Q4 2017. There was also a 22% increase in the number enquiries over 10,000 sq ft (39% of all enquiries). Supply remained stable, increasing by only 4% to 1,023,689 sq ft.

Q1 2018 saw transactional volume hit nearly £100m; 80% of which was attributable to Internos’s purchase of the NATS building located at Solent Business Park for c.£83m reflecting a NIY of 5.2%. Other activity at the park included Wesleyans acquisition of Leander House let to Northrop Grumman UK Limited for a term certain of 5 years at a rent of £755,000 (c.£16.90 psf). The final agreed price was £7.36m reflecting a NIY of 9.60%.

Enquiry levels increase by 20%

Enquiry levels (>2,500 sq ft) increased by 20% from Q4 and were in line with average enquiry numbers for the past 3 years. There was a significant reverse in the 2017 trend of smaller enquiries with only 14 enquiries below 5,000 sq ft when compared to 30 enquiries in the same size bracket in the previous quarter. 22% of all enquiries were over 20,000 sq ft including two above.

Q1 2018 South Coast office market pulse enquiries

Take-up falls to lowest level in 5 years

Take-up fell to only 27,287 sq ft in Q1 2018, the lowest quarterly take-up during the past five years. It comprised of only three transactions.

Significant occupational transactions

Property	Size (sq ft)	Vendor/Landlord	Tenant/Purchaser	Rent (£/sq ft)	Term
Forum 5, Solent Business Park, Fareham	12,500	Tristan Capital	Shoosmiths	£18.50	10
Director General's House, Southampton	8,722	C&G	The Workstation	£18.00	10
Building 6000, Langstone Technology Park, Havant	6,065	Trinity IM	Battelle	£14.00	10

Supply makes a slight increase in Q1

Supply slightly increased by 4% to 1,023,689 sq ft. The greatest increase in availability (albeit relatively insignificant) is in the city centre. Grade A supply at 299,683 sq ft increased to stand at 29% of total supply. This increase is exclusively as a result of refurbishments of existing office stock. There were no new offices built throughout the whole of 2017 (there will be 20,850 sq ft completed at Chilcomb Park, Winchester later in 2018).

South Coast Office Market Pulse Q1 2018 supply

Rents remain stable

Prime rents remained stable at £22 per sq ft in Southampton city centre and £21.50 per sq ft in the Out-of-Town (M27 corridor) market.

City centre opportunities attracting investor interest

Q1 2018 saw transactional volume hit nearly £100m; 80% of which was attributable to Internos’s purchase of the NATS building located at Solent Business Park for c.£83m reflecting a NIY of 5.2%. Other activity at the park included Wesleyans acquisition of Leander House let to Northrop Grumman UK Limited for a term certain of 5 years at a rent of £755,000 (c.£16.90 psf). The final agreed price was £7.36m reflecting a NIY of 9.60%.

The final key deal was the sale and purchase of 1 London Road within Southampton city centre for £5.585m (5.91% NIY). The property was let to Paris Smith LLP with 10 years term certain at a rent of £352,000 per annum (£17.87 psf).

‘New to market’ over the course of Q1 included 4500 Parkway located within Solent Business Park. The property, which totals 56,900 sq ft, is multi-let at a passing rent of £781,877 per annum. The UK Fund vendor is quoting £9.45m (7.75% NIY).

The message remains the same; ‘out of town’ offices still appear to be viewed far more cautiously and carefully by investors. ‘In Town’ still sees robust demand with live investor requirements targeting key south coast locations.

South Coast Office Market Pulse Q1 2018

Enquiry levels increase by 20%

Take-up falls to lowest level in 5 years

Significant occupational transactions

Supply makes a slight increase in Q1

Rents remain stable

City centre opportunities attracting investor interest

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South Coast Office Market Pulse Q1 2018

Enquiry levels increase by 20%

Take-up falls to lowest level in 5 years

Significant occupational transactions

Supply makes a slight increase in Q1

Rents remain stable

City centre opportunities attracting investor interest

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