Demand for Grade A office space in Southampton to drive market this year

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Nicky Godding

Southampton's cruise industry generated over £1bn for the region's economy

Demand for Grade A office space, with the best sustainability credentials in Southampton, is expected to continue through 2024, according to a leading real estate group.

In its UK Real Estate Market Outlook 2024, commercial property firm CBRE is predicting signs of an economic recovery in the second half of the year with a stronger rebound forecast for 2025, as debt burdens on both businesses and households begin to ease.

However, the demand for office space in Southampton will remain strong for the highest quality space. Due to the lack of availability in the city, rents are continuing to rise. Grade A rent rates have jumped to £29.00 per sq. ft. at the end of 2023 from a previous high of £25.50 per sq. ft, say CBRE.

The drive for premium workspace is partly through organisations’ desire to tempt their staff back to the office whilst meeting their ESG requirements.

“The majority of demand is focused on the highest quality space and those buildings which have strong sustainability credentials,” Emma Lockey, Director at CBRE Southampton, said. “Companies are generally focusing on providing space that staff want to work in and are now actively encouraging staff back in for reasons including mental health, career development and training.

“As a result, we have seen rent continue to rise on Grade A space with very limited supply cross the South Coast.”

Currently, there are no speculative office development schemes underway in Southampton, which means the market will be driven by high quality refurbishments to existing sites.

Sustainability will continue to be a focus for the year ahead, with an accelerated transition to net zero across the industry. CBRE predict there will be a period of price discovery as the industry improves its understanding of the cost of sustainability capital expenditures and how sustainable properties perform relative to less sustainable assets. Furthermore, physical climate risks to buildings and infrastructure will be of growing importance to occupiers, investors and lenders and regulation and disclosure will begin to turn its focus to nature and biodiversity.

Nicky Godding

Nicky Godding is editor of The Business Magazine. Before her journalism career, she worked mainly in public relations moving into writing when she was invited to launch Retail Watch, a publication covering retail and real estate across Europe. After some years of constant travelling, she tucked away her passport and concentrated on business writing, co-founding a successful regional business magazine. She has interviewed some of the UK’s most successful entrepreneurs who have built multi-million-pound businesses and reported on many science and technology firsts. She reports on the region’s thriving business economy from start-ups, family businesses and multi-million-pound corporations, to the professionals that support their growth and the institutions that educate the next generation of business leaders.