South Coast: Office supply likely to fall below one million sq ft, warns LSH

Lambert Smith Hampton (LSH) reports in its annual South Coast office market briefing that the lack of supply remains critical and that take-up is suffering. It is expected that availability will fall to less than one million sq ft by the end of 2016.

An indication of the lack of supply and improving demand is that notable office buildings along the M27 corridor which had been vacant for some time are now fully let. These include Forum 1 and Spectrum – both on Solent Business Park, Spinnaker House in Fareham, and Pavilion in Hedge End.  Almost all of this space has been let in the last 12 months. At the eastern end of the corridor, significant buildings such as Langstone Technology Park have over 90% occupancy. There is very little supply in Portsmouth city centre, and 1000 Lakeside is, in effect, fully let.

A decline in enquiries was seen during the second half of 2015, in particular in the fourth quarter. This is likely to have been influenced in part by global economic factors and also the continued fall in supply. Opportunities for businesses to relocate have thus been constrained, prompting occupiers to renew leases within their current buildings. A possible fall in take-up in 2016 is thus expected. On a more positive note, the first signs of speculative development are emerging and rents are expected to continue their upward trajectory.

Andrew Hodgkinson, director of office agency for LSH's Southampton office, commented: "Despite the challenges in the global economy, the outlook for 2016 is positive, with the IMF forecasting 2.2% economic growth for the UK. While enquiry levels dropped towards the end of 2015, the average transaction size actually increased. Despite the well-documented issues with supply, occupiers with strong balance sheets are still planning for growth and we predict some significant lettings in the Solent region during 2016."