The characteristics of the West London and Thames Valley office markets mean they are well placed to weather any Brexit storms, whatever form the deal eventually takes, but market players will need to be on top of several rapidly moving trends if they are are to secure leasing and investment ‘gold’.
JLL launched its annual Western Corridor report saying the office leasing market across the Corridor had performed at a “steady rate” and forecast it would surpass 2m sq ft of take-up by year end – up on 2017 but down on the 10-year average – thanks to a number of large deals that are moving close to completion. At H1 960,000 sq ft had been transacted, up 13% on H1 2017.
Overall take-up has slipped over the past decade and JLL cited a shift in the amount of space that occupiers are signing up to, with the average deal size in the region moving from 22,000 sq ft in 2008 to 15,500 sq ft in 2017.
Head of South East office agency James Finnis said the fact is the market is now about “quality not quantity”.
JLL said occupiers are taking well located, good quality space and in H1 2018, just over 70% of deals were below 20,000 sq ft.
The provision of flexibility is now a key consideration for the region’s landlords and occupiers, JLL said.
JLL highlighted that over the past 12-18 months leasing activity from service operators has risen significantly. In H1 2018, there was 175,000 sq ft of flexible space leased, representing 18% of total take up, with the majority of space transacted in the Thames Valley.
UK head of corporate solutions Sue Asprey said corporate occupiers were now looking at having around 30% of portfolios being devoted to flexspace.
In the face of this move JLL said landlords should be focused on improving amenity and customer relationships, adopting short-form leases, and “rentalizing” fit out.
Anecdotally JLL said permitted development rights legislation – which has taken so much space out of the market – was less and less of a factor.
JLL highlighted the autotech industry as a key sector for growth as the wider Thames Valley is at the heart of the developing battery technology sector in the UK.
It said: “With the growth of electric vehicles, powering these new vehicles will require new and innovative battery technology. The Life Sciences cluster in the wider South East is also increasing in strength, with occupiers wanting to be located close to their suppliers, customers and competitors with access to their international markets via Heathrow.”