Thames Valley: Office market pulse robust, finds LSH

Proving it is worthy of its credentials as a resilient and robust office market, the Thames Valley is weathering 2016's Brexit uncertainty storm remarkably well, according to Lambert Smith Hampton's (LSH’s) quarterly office market pulse.

Despite a poor second quarter, enquiries for the year were 8% below 2015’s high total, but in the final quarter of 2016 take-up rebounded by 49% on the previous quarter, many major transactions took place in the occupational market, and investment volumes exceeded those reported in 2015.

Nick Coote, head of the Thames Valley for LSH, explained: “Despite the referendum ghost quarter, the Thames Valley office market has coped well. Not only was Q4 2016 transactional activity up by 49% compared to Q3, it was also 37% higher than that seen in Q4 2015, indicating increasing market velocity and supporting our expectations for a healthy 2017”.

Take-up in Q4 2016 was 439,331 sq ft, 49% more than the 294,250 sq ft transacted in the previous quarter and 36.5% up in comparison to Q4 2015 (321,783 sq ft). This rebound meant that the total take-up for 2016 was 1.7m sq ft, only 18% lower than the 2.08m sq ft recorded in 2015. 

Reading was responsible for 25% of all take-up in the year, and it was one of only three Thames Valley centres which saw take-up of more than the long-term average. This was largely because A-stock was available in Reading, and 60% of the overall take-up in Q4 2016, for example, was grade A.
 
Investment into office assets in the Thames Valley continued unabated during Q4 2016. While total volume for the quarter was the lowest of the year at £300 million, the previous three quarters each had the welcome boost of a stellar £300m plus deal – the Bath Road frontage in Q1, Green Park in Reading in Q2 and the BP Campus in Sunbury in Q3. Stripping these deals out of the numbers, Q4 recorded the highest volume of the year and with over £300m of assets under offer, these levels of activity appear to be sustainable.  

Total volume for 2016 was £2.3 billion, which exceeds the total for 2015 by 10%. This is an excellent vote of confidence into the vitality of the Thames Valley economy, considering that total investment into UK real estate fell by approximately 30% during this same period. Against a backdrop of political and economic uncertainty, investors have migrated to core locations, and consider the Thames Valley well placed to weather the potential storm. 

Among the key transactions during the quarter, with keen yields paid for the best stock, were Hitachi House, Staines, bought by Runnymede Council for £10.1m; Braywick Gate, Maidenhead, a multilet where pricing exceeded the quote level of £18.65m; Waterside House, Bracknell; and 40 Oxford Road, High Wycombe for which Canmoor paid £9.9m.