There is a lack of office stock in the South Coast market, in particular, of grade A accommodation, according to office market pulse Q3 2015. A number of development sites that were allocated for offices have now either converted to alternative uses or are subject to planning applications for change of use and this looks set to continue.
Andrew Hodgkinson, director of South Coast office agency for Lambert Smith Hampton (LSH), commented: “We now have less than three years' supply of office space along the South Coast. With availability continuing to fall and with limited new development in the pipeline, the choice for businesses is narrowing. As a result, rents are on the rise and incentives offered to tenants are reducing.”
These factors are leading towards a situation where speculative development is being stimulated in prime locations such as Southampton Science Park. This is a speculative building of 30,600 sq ft which has been driven by high occupancy on the site and excellent fundamentals of location, amenity, parking and connectivity.
Take-up increases to 58% above the 10-year quarterly average
There was a fairly even split of take-up between city centre and out of town and notably, the average transaction size rose to approximately 6,800 sq ft from 5,250 sq ft in H1 of 2015. Perhaps highlighting the lack of supply and improving demand, office buildings along the M27 corridor that have been vacant for some time are now fully let.
Enquiry levels fall across the board
Following a consistent level of enquiries in H1, there has been a decline in Q3, not just in one specific size range but across all.
Q1 saw 52 new enquiries, Q2 saw an increase at 86 and then there has been a fall in Q3 to 43. Despite this, Q3 enquiries remain above the average quarterly enquiry levels of the past two years.
Significant transactions
Property | Size (sq ft) | Vendor/Landlord | Tenant/Purchaser | Deal info |
Solvay Premises, Southampton | 30,691 | Confidential | Confidential | Freehold sale for development |
63 St Marys Street, Southampton | 13,890 | Confidential | Confidential | Freehold sale for development |
Spectrum, 1600 Parkway | 13,246 | Craigard | BMT | 10 year lease |
Spinnaker House, Fareham | 13,239 | Horatio Properties | Wartsila | 10 year lease |
Charlotte Place, Southampton | 11,723 | McAleer & Rushe Group | Berryman Lace Mawer | 10 year lease |
Prime rents remain static but show the potential to increase
The last time that rents in the city were £21.50 per sq ft was in 2007/8. Looking back over the past 10 years, out-of-town rents peaked at just £20 per sq ft. It is expected that rents will continue to see growth at around 3% per annum in city centre markets and around 1.5% per annum in the out of town markets.
Supply falls to below three years worth
With continued strong take-up figures, LSH expects a further fall in office supply and, in particular, in the supply of prime office accommodation.
Investment overview
Q3 has retained momentum with a number of office investment sales completing and further new opportunities being brought to market, including …
Key investment transactions
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