Thames Valley: Crossrail fuels demand for office assets

Around £710 million has been invested into office assets in the Thames Valley Crossrail corridor* over the 12 months to May 2019. This equates to around double the corridor’s historical annual average of around £310m, with buyers looking to capitalise on stronger occupier demand and future value growth potential along the Crossrail route.

Volumes have been underpinned by a string of landmark acquisitions by local authorities, with Spelthorne Borough Council’s acquisition of three prime assets from the Landid/Brockland Capital joint venture in August 2018 the most notable. The £285m sale included Thames Tower in Reading and The Porter Building in Slough, which are estimated to have contributed around £180m of the sale price.

More recently, in January 2019 Reading Borough Council acquired the Four 10 office building at Thames Valley Park in Reading from private clients of HSBC Bank for £38m.

Foreign capital has also been active. In October 2018, pan-European investment manager Valesco Group’s joint venture with Korean consortium AIP Asset Management acquired buildings 1, 2 and 3 of the Microsoft Campus in Reading from FI Real Estate Management and Solutus Advisors for £100m.

Investors have been encouraged by the robust fundamentals along the Crossrail route but also across the Thames Valley area. Fuelled by both a constrained development pipeline (a spate of residential conversions have also occurred over the past five years) and more than 1.7m sq ft of net absorption in the past 12 months, vacancies across the Thames Valley have fallen sharply. Indeed, they fell to just 7.3% in May 2019, their lowest level since 2004. Rents have grown accordingly.

*The Thames Valley corridor refers to a three-mile diameter path following the route of Crossrail within the Thames Valley region.

Source: CoStar