Thames Valley

Property News Index

Read about the latest news, views and developments in the commercial property world from our industry expert.

A resilient SHOW
THAMES VALLEY tonic
Winning WINNERSH
InBrief #1
Oxford HITS THE HIGH NOTE
A LEXICON FOR growth
DIG FOR victory
BLOOMING Bicester
InBrief #2
TOP dog
BETTER IN Basingstoke
Jansons Sorbon

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Thames Valley Commercial Property News - Monday, October 9, 2017

Issue #58

A resilient SHOW

Thames Valley News

Resilience is the key description for the region’s market as it weathers the uncertainties of Brexit and the impact on the property market.

That is the view of Lambert Smith Hampton (LSH) in assessing the current situation after a year in which take up was below par with a decline of 19% to 157,930 sq.metres (1.7 million sq.ft.) in 2016 compared with the previous year.

Nick Coote of LSH said: “Within the context of the Thames Valley office market, this has remained remarkably resilient in both the occupier and investment markets.

However, there are some fundamental changes in occupier demand”.

What shines out from the report is that Oxford, Reading and Staines have outperformed their longterm averages. Bracknell has had a strong first quarter while Oxford has continued its strong showing.

The significant change taking place is the shift to small space requirements in the range of up to 929 sq.metres (10,000 sq.ft.). This is because of companies cutting costs through shared space and the increase in the number of SMEs.

At the same time, supply has continued its six years’ decline to a current 817,520 sq.metres (8.8 million sq.ft.), or 4.5 years’ supply. These figures hide another important change; the near disappearance of Grade C space and the decline in Grade B, mainly because of conversion to residential use.

In contrast, Grade A space has increased and is providing the type of buildings the tech industry wants, also bringing higher rents, a feature in most towns.

LSH expects a quiet market ahead because of political and economic pressures but notes the rising demand from small companies and the impact of Crossrail (Elizabeth Line). For example, the new line will more than double the working population to 6 million within a one hour public transport travelling time of Reading.

While Cambridge is usually called Silicon Glen, the Thames Valley has a claim to be the Silicon Valley of the UK because of the number of large tech companies (such as Cisco, Microsoft and Oracle) who reside there, apart from the high percentage of people working in the industry.

For example, a report from Tech Nation said the tech industry in Reading had grown by 57% in the period 2011-2015 while in Oxford the growth was 43%. Reading is second only to London in the digital economy at £12.5 billion employing 45,269 people.

THAMES VALLEY tonic

Thames Valley News

One of the dominating sectors in the Thames Valley is pharmaceuticals, which accounted for 30% of the take up in 2016.

Indeed, Savills report that the region has the highest concentration of life science employees and companies in the UK. In the first quarter pharmaceuticals accounted for 9% of the take up in the south east.

UK companies only accounted for 28% of transactions, while the US groups took 63,689 sq.metres (685,563 sq.ft.) last year, or 41% of the total.

Simon Preece of Savills commented: “The pharmaceutical industry received £519.7 million in investment last year, following the £1.48 billion of 2015”.There is a problem, however, with the impact of Brexit. According to a report by Brick Vest, 60% of institutional investors quote Brexit uncertainty as their biggest challenge in relation to investment in European real estate.

Looking ahead, Savills predicts that there will be a greater emphasis on pharmaceutical clusters as cooperation between companies and big data analytic providers become crucial to improving efficiency. Savills cites the Thames Valley Science Park as one place where this is happening.

Winning WINNERSH

Thames Valley News

A resounding vote of confidence in the viability of the business parks in the Thames Valley has come with the Singapore listed Frasers Centrepoint lining up to buy a portfolio from Oaktree Capital Management and Patrizia.

The jewel in the crown is the 85 acre Winnersh Triangle, which had originally been lined up for a sale to a new company, Capreon.

The portfolio, which is worth around £900 million, also includes Watchmoor Park, Camberley; Chineham Park, Basingstoke; Birchwood Park, Warrington and Hillington Park, Glasgow.

The market view is that the buyer will break up the portfolio and sell the parks separately.

InBrief #1

Thames Valley News

Serviced office providers are expanding in the Thames Valley, particularly Regus, who have now opened another business centre in the Gatehouse building in Aylesbury, following their recent expansion at Heathrow’s Terminal 2. Regus said that the Aylesbury building is “at the heart of the thriving Thames Valley”.

Oxford HITS THE HIGH NOTE

Thames Valley News

While the economic uncertainty over Brexit may pervade many boardrooms, there is an antidote to this in Oxfordshire where the business parks are in such rude health.

There is a proliferation of new developments planned for the parks combined with the arrival of new occupiers and the expansion of indigenous companies. The flavour can be captured by the Canada Pension Plan Investment Board (CPPIB) buying Hermes’ 50% stake in Milton Park for around £200 million.

The largest speculative development Oxfordshire has ever seen is at Harwell Campus, where a 17,651 sq.meets (190,000 sq.ft.) development is underway, part of which is the refurbishment and expansion of the Runway building, following the completion last year of the Genesis building. It is anticipated that the 5,574 sq.metres (60,000 sq.ft.) Zephyr building will be predominantly pre let. Zephyr, along with two sister buildings, is complementary to the 4,645 sq.metres (50,000 sq.ft.) Quad One development which will complete this year.

An example of the type of occupier at Harwell is Cobalt Light Systems (now part of Agilent Technologies Inc) who are leasing a 2,183 sq.metres (23,500 sq.ft.

bespoke building. Cobalt, the fastest growing SME in the UK in 2015 and Queen’s Award for Enterprise winner, is moving from Milton Park.

William Cooper of Harwell Campus Management commented: “The campus is witnessing the most significant growth seen in this sector anywhere in the UK at the present time, creating a European innovation district comparable to MIT in the USA”.

A LEXICON FOR growth

Thames Valley News

The opening of the 53,882 sq.metres (580,000 sq.ft.) Lexicon Shopping Centre as part of a £760 million regeneration is set to boost the performance of the commercial market in Bracknell Bracknell is already a strong performer this year, said Simon Fryer of Fryer Commercial, with 23,225 sq.metres (250,000 sq.ft.) let or under offer and the town is now short of prime office space.

“We have lost about 69,675 sq.metres (750,000 sq.ft.) of offices to residential conversion, so there is only around 46,450 sq.metres (500,000 sq.ft.) of Grade A and B available”, Fryer said.

The fact that there is little new development means that rents will increase, he added. He quoted 1 Arlington Square, where Fryer Commercial is seeking £301.28 a sq.metre (£28 a sq.ft.), well ahead of a recent high.

DIG FOR victory

Thames Valley News

Such is the pressure for industrial property at, or close to, Heathrow that new ideas are coming through to provide more space on a given site.

First it was the double decker and now investors are being sought for a £300 million underground facility of 185,800 sq.metres (2 million sq.ft.) at Rectory Farm, Hounslow. Formal Investments is being advised by Savills and CBRE and the scheme already has planning permission.

Rental projections are for similar levels to Heathrow at £118.36 a sq.metre (£11 a sq.ft.).

` Nicholas King of Formal said: “Getting planning for a site is an achievement, particularly for a new concept like this one”.

This type of project does make sense in an area like Heathrow where the rents make it possible to get structures that are higher cost construction projects.

Bridget Outtrim of Savills said: “Rectory Farm demonstrates the large range of opportunities there are to create storage space”.

BLOOMING Bicester

Thames Valley News

Smaller science and business parks are also thriving in Oxfordshire, an example of which is the new PERCH business centre at Elmsbrook, Bicester.

The 1,399 sq.metres (15.064 sq.ft.) building, which is being promoted by Cherwell District Council, is aimed at small local businesses. Interestingly, it has received funding from the European Regional Development Fund.

Also at Elmsbrook, Crest Nicholson and A2 Dominion are building 232 eco homes, 30% of which are affordable, in an £80 million project.

InBrief #2

Thames Valley News

A positive view of the market is shown by Adrian Dolan of Duncan Bailey Kennedy, who said: “ Despite Brexit, the commercial property market in High Wycombe has proved robust across all sectors so far this year. Rents above £10 a sq ft have been achieved on Cressex Business Park and there is demand from owner occupiers wishing to purchase their own units”.

TOP dog

Thames Valley News

Even before Crossrail reaches it, Reading is strengthening its top position in the region, exemplified by a large new development by Hermes.

It has submitted plans for a mixed use project of 111,480 sq.metres (1.2 million sq.ft.) adjacent to Reading station with eight buildings, the tallest being 24 storeys.

Apart from a substantial amount of residential accommodation, the former Royal Mail Sorting Office site will have 33,444 sq.metres (360,000 sq.ft.) of offices. The attraction for potential tenants is not only Crossrail when it is totally completed in 2019, but also British Rail’s plan to double the number of services an hour into London to four.

Reading is, of course, the key town in the Thames Valley with Lambert Smith Hampton putting its proportion of the regional office market at a quarter. In 2016, 94% of the space let was Grade A.

The popularity has pushed office rents up to £395.43 a sq.metre (£36.75 a sq.ft.) in the town centre and only slightly less than that in the out-town business parks.

Tom Fletcher of LSH commented: “Reading has performed strongly in 2016 and even more strongly in the first quarter of this year. Those buildings that offer a little more quality and amenities continue to attract the most attention”.

On the other hand, Reading has the second highest vacancy rate in the Thames Valley at 19% after 57,134 sq.metres (615,000 sq.ft.) of new space came onstream in 2016. LSH believes that take up this year will be ahead of the average.

An example of a new occupier is the recruitment firm Austin Fraser who is the first tenant of the Thames Tower, a landmark building by Landid and Brockton Capital, which has a restaurant, sky lounge and large rooftop terrace.

James Silver, Development Director at Landid, said: “We are delighted to welcome Austin Fraser. Their ethos matches our own – lively, innovative and focused on people”.

One new site on the market which offers huge potential is the BBC’s 93 acre historic Caversham Park, being marketed by LSH, whose Philip Hunter said: “This is a prime site of scale and location in the most affluent part of Reading, just two miles from the railway station”.

BETTER IN Basingstoke

Thames Valley News

What is important for the market in the region is that as many towns as possible share in the improvement.

For example, there has been more activity in Basingstoke with FCB Halesway, a leading healthcare company, relocating from Andover to the Midpoint building in a deal brokered by JLL.

One major reason for the move is to have access to the skilled labour pool in and around London, as well as more space for an expanding work force.

Nella Pang of JLL said: “The company is relocating to be near communication links and local amenities which means they will have access to new skills and allow them to grow the business”.

Another letting has been managed by London Clancy with HC Group moving to Network House, Basing View. Mark Clancy said: “It is important to keep such a company as HCR within the Basing View Business Area given their longstanding connections with Basingstoke and their extensive customer base”.

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