Property consultancy looks west

Guy Parkes, Vail Williams Partner based in Reading. Pic © Nick Strugnell.

The office market is at a pivotal moment across the Thames Valley and Surrey territories, while industrial and logistics remains a hugely competitive sector.

This is revealed in the influential new ‘View West’ publication – covering office, industrial and logistics trends across the region – compiled by regional specialists at property consultancy Vail Williams.

The report explores themes such as supply and demand, design and delivery, and rental trends, as well as some of the key market transactions of the last six months.

Vail Williams teams in the Thames Valley and Surrey, one of the largest multidisciplinary property teams in the south, are working in tandem to deliver strategic advice across all sectors.

With the economic and political landscape continuing to evolve quickly, as energy prices increase alongside the cost-of-living crisis, the team believes there will be a big impact on the market in the last quarter of 2022.

Guy Parkes, Vail Williams Partner based in Reading, said: “The office market pendulum is continuing to swing back towards the workplace with companies embracing hybrid working and seeking to redesign, repurpose and relocate their offices to suit.

“Office attendance remains at approximately 20% off pre-covid levels and even with signs of increased occupancy as companies get back into a rhythm most businesses are still looking to take some 40-50% less space than before the pandemic.

“Media and gaming companies, professional services and the public sector have taken a strategic and longer-term approach to future office needs and have been the driving force behind office activity across the Thames Valley and Surrey regions.”

“Availability of the latest generation Grade A or Cat A+ space is beginning to dwindle across the region, as there is limited planned new development in the pipeline, meaning that refurbished Grade B space will start to fill the gap.”

The flight to quality has continued with buildings offering excellent location, parking, amenity, flex space and quality of finish strongly in demand.

There is approximately 9.5m sq ft of office space on the market across the Thames Valley and Surrey region, the majority of which are in lumpy 100,000 sq ft plus schemes, however the vacancy rates for Grade A buildings in individual towns remain low, fuelling rental growth still in some locations.

Record rents of £47.50 to £60 psf have been recorded at Windsor, Watford, St. Albans, Hemel Hempstead and Guildford.

The new Elizabeth Line opening up the region to the tube network for the first time is expected to lead to greater access to talent for businesses across the Thames Valley and Surrey and support hub and spoke strategies for re-locating office eco-systems

Demand for industrial space and development land for industrial use means it remains a competitive sector – both from an investment and occupier demand perspective.

The first half of 2022 saw record levels of industrial take-up continue above the long-term average across the Thames Valley and Surrey, with hotspots of activity in the film production and life sciences sectors.

Charlie Nicholson, Vail Williams Partner based in Woking, said: “As interest rates continue to rise, we could see this affect borrowing/finance in industrial construction and development into 2023, and therefore the pricing of the end let investment.

“For occupiers, as rents continue on an upwards trajectory, and a lack of meaningful supply persists, this is painting a worrying picture – particularly ahead of Revaluation 2023 and the potential for a significant business rates hike.

“Indeed, the whole nature of an industrial deal has changed with inflation related caveats and scenarios now built in. Occupiers need to budget for rent inflations and ensure that, working with a property professional, they forecast for every potential scenario possible, to avoid any unwanted surprises.”

Charlie added: “As build costs continue to rise, we will see rents increase in order to sustain the pricing of constriction and the purchase of land. To date in 2022, record headline rents continue to be achieved, creating an incredibly competitive market in redevelopment/development terms.

“There remain pockets of affordability in places such as Camberley and Frimley and north to Wokingham or further west to Newbury and Swindon, however places like Park Royal are seeing rents at £30 psf, on a par with offices.”