In CBRE’s first-half review of the Southampton office market, leasing activity remained steady. The largest city-centre deal saw Norwegian Cruise Line lease 17,263 sq ft at Mountbatten House and out of town, Shoosmiths acquired 12,894 sq ft at Forum 5, Solent Business Park.
There are a number of larger enquiries in the market, however, the choice is restricted and evidence shows that businesses are taking a longer time to commit to a decision. Uncertainty about Brexit, particularly in the manner it may impact a port city such as Southampton, may also be a contributory factor to this delay.
CBRE south central regional managing director James Brounger commented: “Occupiers are increasingly cautious with their decision making. With availability continuing to decrease we may see occupiers remaining in their existing space, rather than relocating to a building that doesn’t fulfil all their criteria.
“More positively, we believe this limited supply has resulted in there being an appetite for letting risk and an anticipation that rents will continue to improve.Yields could well move in for specific office opportunities although they have probably reached a peak from an industrial perspective.”
The volume of available space has continued to decline for the past eight years, accelerated by the sale of buildings for conversion to other uses.
At the end of H1 2018, available space was 287,596 sq ft, split 50/50 between secondary and Grade A stock, a decline of 8% since January. The largest space is at 2 Grosvenor Square, with 29,460 sq ft available.
Prime rents are currently around £21 per sq ft and unlikely to move substantially in the near future for existing stock. However, with limited supply of good quality space there is now an increasing opportunity for pre-lettings which could demonstrate a reasonably substantial uplift.
Demand has remained relatively stable across the region with a broad range of investment interest. Buyers looking for value continue to find it in the region, particularly when compared with the M25 area. However, the lack of stock continues to prevent investors gaining a firm foothold locally.