Thames Valley Office Market Pulse Q1 2018

Take-up in the Thames Valley office market stayed steady at 415,128 Sq ft in Q1 2018, compared to 430,502 Sq ft in Q1 2017 and 449,121 Sq ft in the previous quarter Q4 2017. The TMT business sector dominated the activity, accounting for 158,572 Sq ft of total quarterly take up. Reading (127,000 Sq ft); Oxford (70,000 Sq ft) and Slough (59,000 sq ft) were most active micro markets. The enquiry levels in Q1 2018, over 5,000 Sq ft, equaled the highest seen, in a Q1 over the last six years, a 62% increase compared to the last quarter Q4 2017.

Q1 2018 saw a healthy level of transactional volumes totalling £434m, being a 53% increase from Q4 2017. There were a total of 15 transactions and an average lot size of £31m. This average lot size is considerably higher than the £17m of Q4, which is a result of 3 of these transactions being over £50m.

Enquiry levels at the highest for 6 years

136 enquiries (over 5,000 sq ft) were received for Thames Valley offices in Q1 2018, an increase of 62% compared with the 84 received in the previous quarter. This is the equal (2016) Q1 level of enquiries for 6 years and is a very encouraging start for the year.

For the first time we have also started collecting enquiries from 2,000 sq ft to 4,999 sq ft and these totalled 74 (NB Not included in the comparable statistic above)

Thames Valley Office Market Pulse Q1 2018 enquiries

Demand is steady and Reading leads the way

Take-up in Q1 2018 was 415,128 sq ft, comparable to the previous quarter Q4 2017 (449,121 Sq ft) and Q1 2017 (430,502 Sq ft). This has been a steady start to the year.79% of Q1 take-up was grade A, whilst grade B accounted for 20% - continuing evidence that occupiers require quality.

The TMT business sector totally dominated take-up in this quarter accounting for 158,572 Sq ft of the total (38%). The three most active micro markets were; Reading 127,057 Sq ft, then Oxford at 70,000 Sq ft and finally Slough at 58,764 Sq ft.

Thames Valley office market pulse Q1 2018 take up

significant occupational transactions

Property	Size (sq ft)	Landlord	Tenant	Rent (per sq ft)	Lease (years)
270 Bath Road, Slough	48,915	AEW	Stanley Black & Decker	TBC	10
Thames Tower, Reading	37,530	Landid/Brockton	Ericsson	£38.00	10
Thames Tower, Reading	27,589	Landid/Brockton	Fora	Base rent + turnover top up	Undisclosed
Belmont, Uxbridge	23,000	Aviva	Giff Gaff	£33.00	10
Tor, Maidenhead	20,000	Rockspring/Blackrock	Lane 4 Management	TBC	10
Schrodinger Building, Oxford Science Park	17,255	Magdalen College Oxford	OSI	£32.00	15
R+, Reading	16,071	M&G	Central Working	Base rent + turnover top up	15
Thames Tower, Reading	14,040	Landid/Brockton	MBNL	£35.00	10
20 Kingston Road, Staines	14,000	M&G	Imtech	£32.00	10

office supply remains stable

Standing at 7.9m sq ft at the end of Q1 2018, Thames Valley total supply has risen, marginally, from 7.7m since the previous quarter.

The supply chain is heavily reliant on new development. We may see an accelerated fall as investors/developers respond cautiously, to a likely reduced letting velocity and volume, in the short to medium term. Although there may be a short term over supply in some locations, an under-supply will follow as new development is delayed, in reaction to a short term uncertain market.

Grade A supply represents 50% of the total, the same as in Q1 2016.

Thames Valley Q1 2018 supply

Investment market review

Q1 2018 saw a healthy level of transactional volumes totalling £434m, being a 53% increase from Q4 2017. There were a total of 15 transactions and an average lot size of £31m. This average lot size is considerably higher than the £17m of Q4, which is a result of 3 of these transactions being over £50m.

The out of town market outweighed the town centre market with £266m transacted in comparison £117m transacted, giving confidence in the out of town market. The average WAULT for transactions during the quarter was 4.66 years, when compared with 5.10 years in Q4 2017, demonstrates a consistent level of risk appetite by investors.

There are currently 13 properties being actively marketed across the Thames Valley region, totalling £218m and with £132m currently exchanged or under offer, Q2 is looks like it will be a steady quarter in line with Q1 figures.

key investment deals

Farnborough Business Park, Farnborough

Frasers Centerpoint have purchased Farnborough Business Park for £175mm from XLB / Harbert, reflecting a yield of 6.78%. The park has a WUALT of 5.8 years and 36 tenants.

Harman House, Uxbridge

CLS purchased Harman House from Pramerica for £51m. This multi-let building totalled 130,000 sq ft and achieved net capital value of £392 per sq f, reflecting a net initial yield of 6.31%.

1 Longwalk, Stockley Park

A private investor purchased the asset from RREEF Special Invest for £30m, being above quoting reflecting a net initial yield of 6.7% and net capital value of £400 per sq ft.

Thames Valley Office Market Pulse Q1 2018

Enquiry levels at the highest for 6 years

Demand is steady and Reading leads the way

significant occupational transactions

office supply remains stable

Investment market review

key investment deals

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Thames Valley Office Market Pulse Q1 2018

Enquiry levels at the highest for 6 years

Demand is steady and Reading leads the way

significant occupational transactions

office supply remains stable

Investment market review

key investment deals

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