Take-up in Q1 2018 was 415,128 sq ft, comparable to the previous quarter (449,121 sq ft) and Q1 2017 (430,502 sq ft). 79% of Q1 take-up was grade A, while grade B accounted for 20% – continuing evidence that occupiers require quality, LSH said.
The TMT business sector dominated take-up in the 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.
Standing at 7.9m sq ft at the end of Q1 2018, Thames Valley total supply has risen, marginally, from 7.7m sq ft since the previous quarter.
The supply chain is heavily reliant on new development.
LSH writes: “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.
LSH said enquiry levels in Q1 2018, over 5,000 sq ft, equalled the highest seen in a Q1 over the last six 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.
Nick Coote, head of Thames Valley, LSH, said: “The Q1 Thames Valley Office market has seen steady activity, in terms of take up. I see two positives going forward – record enquiries for a first quarter and within that some larger searches. We are going to witness some real supply pinch points – Maidenhead town centre a particular example.”
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 three 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 13 properties being actively marketed across the Thames Valley region, totalling £218m and with £132m currently exchanged or under offer, it looks like Q2 will be a steady quarter in line with Q1 figures, LSH reports.
Farnborough Business Park, Farnborough
Frasers Centerpoint has purchased Farnborough Business Park for £175m from XLB / Harbert, reflecting a yield of 6.78%. The park has a WAULT of 5.8 years and 36 tenants.
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.