Western Corridor: Office take-up jumps 13% as supply shortages loom

The Western Corridor office market, which includes the Thames Valley, saw take-up levels of 460,000 sq ft in Q2 2018, boosting the half-year’s take-up to 965,000 sq ft – an increase of 13% on the corresponding period of 2017, reports JLL.

The Western Corridor’s investment market saw £417 million transacted in Q2 taking volume  for the first half of the year to £673m, representing a 7% rise on the first half of 2017.

JLL said it has identified a shift in the size of deals in recent times, with much of the activity focusing on smaller size bands.

The first half of 2018 was characterised by smaller deals – of the 62 transactions completed in H1 2018, 42 of them were undertaken on space in the 5,000 sq ft to 20,000 sq ft size bracket.

JLL said the strong take-up levels in 2018 had contributed to the “continued erosion of the supply pipeline”. JLL said supply levels had fallen by 11% to 9.1m sq ft.

James Finnis, head of South East office agency at JLL, said: “Occupiers in the Western Corridor are increasingly focused on the best, available supply – prioritising quality over quantity.

“Infrastructure improvements, increased access to improved amenities and the addition of flexible space (serviced and co-working) in multi-let buildings have all played a part in accelerating the Western Corridor’s position as a modern commercial destination that is enjoying sustained levels of demand. The pressure is now on developers to address the lack of new supply coming through in the wider South-East market which is becoming acute. The development pipeline in 2019 and 2020 is very limited and a number of centres face medium-term supply shortages.

“Despite the current political and economic uncertainty, real opportunities exist for developers and investors to capitalise on the demand for quality space and to address the supply gap in 2020 and beyond.”

JLL highlighted that the Western Corridor investment market recorded volumes of £417m in Q2 2018, a fall of 7% from the corresponding quarter of 2017. Volumes for the first half of 2018 totalled £673m which represents an increase of 7% on the corresponding period for 2017.

Angus Minford, director of capital markets at JLL, said: “The H1 volumes are up 7% on those for the 2017 record year. Last year the bulk of the larger transactions took place in the second half of the year and it remains to be seen if 2018 will be able to keep pace with this. UK buyers are significantly outweighing overseas investors across the Western Corridor but we do expect this balance to be redressed to some extent in H2.”

Source: CoStar