Knight Frank Sorbon

View our extensive range of commercial Office and Industrial properties to buy, lease and rent in the Thames Valley area.

Thames Valley Commercial Property News - Monday, February 25, 2019

Issue #62

HOLDING on

Thames Valley News

The Thames Valley, like other parts of the UK, has surprised us with a strong performance recently, overcoming fears of the economic consequences of Brexit.

While that is true, it is also hard to judge what might have happened without the European exit hanging over the UK.

According to Knight Frank, leasing volumes for offices in the south east last year are likely to have reached 362,322 sq metres (3.9million sq ft) in 2018, the highest level since 2008.

Emma Goodford of Knight Frank commented: “We are on course for a strong performance with leasing volumes set to reach a ten year high.

A convergence of factors, including Crossrail, out-of-town activity, the attractiveness of co-working and the continued growth of TMT are driving the increased volumes, making the predictions for 2019 on par with levels last seen in 2002, post the dot com crash."

The role of TMT companies is paramount and they accounted for 28% of the total compared with 26% in the previous year. The largest deal in the M4 corridor was Publicis taking 19,602 sq metres (211,000 sq ft) at Television Centre, White City.

Although the full opening of Crossrail was delayed, it was still a magnet with close to 111,484 sq metres (1.2 million sq ft) of office space acquired around its stations.

Throughout the UK the amount of offices being let for co-working is on the rise and in the case of the south east, Knight Frank estimated this totalled 16% of all leasing last year-up from 12% in 2017.

Equally as satisfying for the region, investment volumes were high at £2.8 billion, although down on the last three years. Simon Rickards of Knight Frank said: “UK buyers have dominated the market in 2018, accounting for 75% of the total, in contrast with 2017 when overseas investors accounted for half of all volumes."

Perhaps the most interesting aspect of the investment market is the way it has changed, with funds selling and councils buying (accounting for a third of all transactions compared with 14% in 2017).

“We believe the fundamentals of the property market in the south east remain particularly positive, driven by an ever-improving infrastructure, talent pools and town centre offerings,” said Goodford. She added that a lack of development and continued erosion of offices to residential use means supply/demand imbalance will be maintained.

Vacancy rates across the south east are below their long-term average and moving on a downward trajectory which will continue in 2019.

Goodford said: “We predict that 32 out of 49 locations will have rental uplift with Oxford, Slough, Watford and Woking set to be the main rental growth areas.”

Caution PREVAILS

Thames Valley News

Current market analysis points to a cautious year with investors slow to grab opportunities ahead of the final moves on Brexit but the fundamentals remaining firm.

An example of these views is Thomas Schneider of BrickVest who said: “The market remains positive but increasingly cautious as nobody wants to be caught out by big price corrections. The biggest trend we are seeing is that investors are increasingly focused on incomeproducing assets."

He noted that “average institutional investor allocations remained at around 3.6% over 2018 and we expect this to remain around the same over the next 12 months.” Yields will increase slightly this year but deals will need to offer a compelling long-term story. Schneider added that “we are confident that investor sentiment will improve in the second half of the year.”

NEW SCHEME FORWoking

Thames Valley News

While the market may be cautious, some town centre mixed-use schemes, such as Coplan’s in Woking, are going ahead.

Coplan has now signed the deal with the borough council for a scheme adjacent to the railway station with 478 residential units and 4,413 sq metres (47,500 sq ft) of commercial space.

The plans are likely to change during the planning process said Coplan but the council is prepared to use compulsory purchase powers if needed to achieve possession of the Woking Gateway site.

Cllr David Bittleston, Leader of Woking Borough Council said: “I am delighted we have formalised plans for the growth and evolution of Woking, complementing our Victoria Square development and positively impacting the local economy.”

MOVING TO Reading

Thames Valley News

Reading appears to be taking a more dominant role in the Thames Valley as it attracts relocations from elsewhere in the region.

That is the view of Vail Williams after analysing details of the deals done in the past three years. Its analysis of take-up indicates an increased frequency of companies relocating towards the centre of Reading - in some cases it is an office moving only half a mile to be closer to the railway station, and in others moving a significant distance.

Further analysis revealed key sector differences with pharmaceutical and TMT companies consolidating space while professional services appear to be growing their space.

Vail Williams quotes two examples. Virgin Media intends to relocate to 11,148 sq metres (120,000 sq ft) at Green Park from Hook and Iqvia is moving just three miles to Reading town centre. In fact there are plenty of blue chip companies that have moved substantial distances, such as Bayer from Newbury and Sanofi from Guildford and Maidenhead.

This has meant over 5,000 employees moving to Reading, said the agent. As a result Reading is equal second in the Demos-PwC Growth for Cities Index.

Vail Williams’ David Thomas said: “Listening to occupiers about the reasons for their relocation to Reading and its environs, there are a few consistent themes. Connectivity and transport links with the muchanticipated Elizabeth Line enhancing Reading’s position as a regional hub outside London, the commencement of the M4 smart motorway upgrade and access to talent for recruitment."

He believes that there is a polarisation of demand between high profile, high quality workspace close to Reading station and accessible business parks “leaving a no-man’s land of secondary locations in between, where obsolete offices are being converted into residential flats."

New space is being developed, such as Mapletree’s development of the next phase of its Green Park on a speculative basis. This will be 21,181 sq metres (228,000 sq ft) at 400 and 500 Longwater Avenue with completion due in August 2020.

The new buildings are close to the Green Park railway station which is due to be completed this year, giving direct access to Reading station and Crossrail services. The decision to build will have been helped by Virgin Media moving to the park.

Rory Carson of Mapletree said: “Our investment on 400 and 500 Longwater Avenue show our commitment both to the park and Reading as the epicentre of the Thames Valley.”

GO logistics

Thames Valley News

The strong performance of the logistics sector which has sustained the commercial property market in the past few years is set to continue, argues CBRE.

It expects the e-commerce sector to sustain its demand for space with ”demand for big boxes increasing fastest.” The sector has ignored the Brexit problem (though some space must have gone for hoarding ahead of Brexit).

The encouraging point CBRE makes is that speculative development is starting to address supply/demand concerns while investment demand has held up well.

What CBRE calls the ‘beds’ sectorrented housing, student accommodation, hotels and healthcare are all experiencing growth. Indeed, CBRE expects institutional money to flow into hotels to join private equity funds.

Miles Gibson of CBRE commented: “With Brexit not yet done and dusted, rather weak UK growth, and a range of international risks, 2019 will be challenging year for UK real estate."

Even so, the interesting statistic from the agent is that investment in UK real estate was £65 billion in 2018, a level expected to continue this year – and the third highest level of UK transactions on record after 2015 and 2017

in the CLOUD

Thames Valley News

The Blade, Reading’s tallest building at 86 metres high, has achieved its 5th letting of 2018 with the aptly named CloudFactory (a global leader in cloud workforce solutions for AI and machine learning). Only 6 months after opening its new global HQ, CloudFactory has expanded into 546 sq metres (5,876 sq ft), with a 6 year lease.

Nick Turner, Asset Manager at owners Northwood Investors, commented: “CloudFactory is attracted to the building due to its presence in Reading town centre as an iconic landmark.” Northwood are determined to offer fast growing SMEs the flexibility to grow within The Blade.

LSH’s Tom Fletcher, who with Haslams represent Northwood, said: CloudFactory’s expansion demonstrates the continuing trend of smaller occupiers growing fast within Reading. Reading is second only to London for concentration of SMEs."

Since purchasing the building in late 2017, Northwood have tripled the size of the reception and added a business lounge. The building is 92% occupied with only a floor of 781 sq metres (8,406 sq ft) and a “plug & play” suite of 206 sq metres (2,208 sq ft) remaining.

GATEWAY TO THE stars

Thames Valley News

A major boost to the UK economy is predicted by Bidwells in its analysis of the Oxford Growth Corridor linking Cambridge through Milton Keynes to Oxford.

At the heart of the project are transport improvements with a planned Expressway road and the reopening of the Varsity railway line.

Bidwells said: “Linking the region’s economic centres is essential to maintain the impressive growth of the corridor since 2013."

It puts the contribution of the corridor to the UK economy by 2050 at £400 billion.

Patrick McMahon of Bidwells said: “The growth corridor is the UK’s next economic powerhouse. This knowledge-intensive region is already big on ideas but is set to become much bigger on economic value too."

Both university cities already boast a thriving business and science park sector, such as MEPC’s Milton Park and the transport improvements will make a significant difference to the growth prospects. However, there are a whole range of changes and initiatives in this corridor such as the creation of Oxfordshire Greentech, a new low-carbon business network at the Said Business School in Oxford. This is a partnership between Cherwell District Council, Bioregional and Cambridge Cleantech.

A report from Oxford University Centre for the Environment says the county has the potential to become a leader in the global low carbon economy.

Demand from the technology sector has underpinned the creation of a new zone on the Bicester Heritage, a former RAF base, now that the existing buildings are fully occupied. Planning permission has been given for eight new buildings totalling 6,503 sq metres (70,000 sq ft).

Interestingly, the buildings have been designed to fit in with the RAF vernacular. A 344-room hotel on the site has also received planning permission and is the first part of a masterplan to create an automotive resort, including a handling circuit, leading event and conference venue, garages with accommodation and also a future technology and engineering cluster.

The hotel will have substantial facilities such as a swimming pool and aparthotel. Underlining the attractions of the area, Marriott is to open a Courtyard hotel close to Oxford city centre, Milton Park and Bicester Village shopping outlet.

The hotel is owned by Reef Estates Hotels.

Morris RE-VISITED

Thames Valley News

One unusual development in Oxfordshire is the refurbishment of the Grade 1 listed Kelmscott Manor, the former home of the designer and writer William Morris.

Planning permission has been achieved by Carter Jonas on behalf of the Society of Antiquaries of London for a new education centre at a building that dates from 1570 and was inhabited by Morris between 1871 until his death in 1896.

The refurbishment means, said Nicky Brock of Carter Jonas, that “visitors can not only enjoy the house and grounds, but learn more about the legacy and its famous resident, William Morris.”

Wait FOR IT

Thames Valley News

While the M3/M27 corridors will have a slow start this year, the second half of 2019 promises more active trading.

That is the view of Mark Clancy of London Clancy who said: “It is anticipated that the underlying fundamentals and trends will continue unaffected during 2019 and to date there has been little direct impact of the current political situation on the commercial property market in our region. These include ongoing strong investor and occupier demand for industrial and warehousing space and in particular Grade A accommodation."

Clancy notes the sustained confidence in the region and cites the example of a number of new developments, such as the redevelopment of the Chineham Shopping Centre in Basingstoke, and other substantial acquisitions like the sale of the Eastleigh Works for £210.6 million.

Clancy expects the industrial sector to be the driver of the market in 2019 with take-up likely to exceed 139,355 sq metres (1.5 million sq ft) with a mixture of local authorities, foreign investors and institutions actively buying.

An example of this is Savills Investment Management buying two units of 6.317 sq metres (68,000 sq ft) on the Houndmills industrial area of Basingstoke for £8.965 million. Angy Benitz of Savills said: “These two units support our strategy of acquiring assets in supply-constrained locations that provide robust and growing income with a valuable residual land position.”

ALWAYS Heathrow

Thames Valley News

Heathrow continues to be a focal point for industrial development and Aberdeen Standard Investment’s (AIPUT) fund now has planning permission for a 23,225 sq metres (250,000 sq ft) cargo warehouse.

The warehouse has been designed specifically for dnata, the large cargohandler at the airport.

This will handle all dnata’s airfreight requirements for key clients.

It is one of the largest off-airport pre-lets at Heathrow and is adjacent to the Southern Perimeter Road.

AIPUT fund manager Nick Smith said: “This planning permission reinforces our position as one of the largest landlords around the airport.”

PROPERTY profile

Thames Valley News

Location: Houndmills Industrial Estate is an established estate in Basingtoke, a major commercial centre only 45 miles south west of London.

Description: Logistics City Basingstoke is a new development of 3 warehouse and industrial units (B2 & B8). Unit B is under offer.

Unit A totals 22,998 sq ft Unit C totals 22,604 sq ft.

All units benefit from separate access and a secure yard. Available March 2019.

Access: The estate is 1.5 miles from the town centre with Newbury, Reading and Southampton only 15, 17.5 and 30 miles away respectively.

Basingstoke train station which provides train services to London Waterloo (49 minutes) is only 1.7 miles away. Road access is via Junctions 6 and 7 of the M3 and the Ring Road Availability: 22,886 – 49,973 sq ft Terms: Leasehold For further details, please contact joint sole agents:- Nick Olliffe, Hollis Hockley 01256 489800 Adrian Whitfield/Charles Wood, LSH 0238033 0041

InBrief #1

Thames Valley News

Co-working firm Fora has developed 2,564 sq metres (27,600 sq ft) on three floors of Reading’s Thames Tower into what they call ‘proworking space’. Fora said it is more akin to a hotel than a workspace, featuring bespoke Danish fabric curtains which have been designed to assist in acoustic control.

HOTELS A winner

Thames Valley News

Apart from industrial property, the other strongest performing sector has been hotels where investment has been increasing over the past few years (up 39% in 2017 in the south east).

A report from hotel specialist Christie forecast similar growth in 2019 to the previous year bringing some rise in values, particularly as “international investment is a key driver, accounting for more than 50% cent in 2018”.

The major worry is a post Brexit deal and the problem of recruitment since the sector employs 400,000 EU migrants.

Carine Bonnejean of Christie said: “Hostels and serviced apartments are increasingly appealing to investors, being more equipped to avoid costs associated with traditional hotels."

As we have seen with Courtyard, Marriott is developing a new hotel in Oxford, the region being a popular one for hotels. Nearer the centre of the city, Christie is marketing the Victoria Hotel (guide price £2.5 million) which has 16 rooms and a restaurant area with 70 covers. The attraction is also a garden extending to half an acre in a prime location.

Tom Orchard of Christie commented: “Hotels in Oxford are an attractive investment due to the city’s reputation as a tourist, business, cultural and academic hotspot”.

The same agent also handled the sale of the Windsor Trooper, a hotel and pub, in the centre of the royal town. Orchard said there was considerable interest with some bids going over the guide price and it was eventually sold for £850,000.

Slough SAILS ON

Thames Valley News

Equally as popular as Heathrow is Slough Trading Estate which has recently leased space to three new arrivals.

The largest of these lettings is the 1,870 sq metres (20,129 sq ft) to the Allen Ford car and van group.

The other two new arrivals are Click Print, a print services provider, at Yeovil Road and A&G Communications, an IT telecoms business which has taken a warehouse on Montrose Avenue.

Slough Estates’ Paul Lewis commented: “The estate has continued to attract new companies throughout the year, with appeal to business across a whole range of sectors showing no sign of diminishing."

Mike Phillips of Allen Ford said: “The quality of workspace and unrivalled location makes the estate the perfect site for our facility.

TEACHING Bracknell

Thames Valley News

Capital London has let 8,400 sq ft in One Arlington Square, Bracknell, to global teacher supplier eTeach, as their UK HQ, moving from Camberley.

The lease is for ten years at an initial rent of £28 psf pa., the highest Bracknell office rent this cycle. Fryer Commercial acted for Capital London; Curchod & Co for eTeach. Only one suite of 6,300 sq ft remains to be let.

Commercial Property Register. All rights reserved. Privacy Policy : Legal Information
Web design and hosting by iWeb Networks Ltd