Office space vacancy rates in Berkshire and north Hampshire at 20-year high

Vacancy rates for office space in Berkshire and north Hampshire are at a 20-year high, despite there being a recent spate of big deals in the prime end of the market.

The data comes from CoStar, the commercial real estate data giant, which showed that the vacancy rate in the two south east areas stood at 12.8% as of late March.

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That is up from below 8% when the coronavirus pandemic struck and nearly 500 basis points above the national office average. CoStar said this was likely to rise further in the next couple of years amid continued subdued demand.

That said, Stanley Black & Decker committed in November to 30,000 sq ft at the Tempo building in Maidenhead, while this month Johnson & Johnson has leased 97,000 sq ft at the same building.

In December, global engineering company Wood leased 117,000 sq ft at Green Park, Reading, in what was the South East’s biggest office letting for two years.

But CoStar noted: "Rising momentum at the prime end comes as the overall market struggles. Firms continue to release space onto the market or consolidate into smaller spaces amid the ongoing pivot to hybrid working and stagnant economic growth.

"A high-profile example saw Chinese telecoms giant Huawei exit its 140,000-square-foot office at Green Park for just 35,000 square feet at nearby Thames Valley Park," it added.

"High vacancy and interest rates have deterred investment and caused prices to fall. Last year was the weakest year for office investment in Berkshire and North Hampshire for 11 years and it remains quiet in 2024, with only a handful of transactions over £10 million since the beginning of 2023," CoStar also noted.

As an example of the fall in prices, Aprirose bought in December last year the Pearce building in Maidenhead for £13.5 million, with the price reflecting a lofty 9.7% yield.

But seller M&G Real Estate acquired the 51,000 sq ft building two years earlier for £26 million, a 6.9% yield and nearly double the recent sale price, noted CoStar.

For more on reporting and analysis on the Berkshire and North Hampshire office market and its 11 submarkets, click HERE.