Businesses across the Thames Valley are rethinking their future workplace strategies with a move away from full remote working, leading to greater demand for flexible, high quality office space which is boosting the market.
Also, the accelerated evolution of online shopping alongside business relocations and supply shortages has led to continuing strong demand and rising rents on the industrial and logistics front.
This is revealed in the influential Thames Valley Property Market Report 2021, compiled by regional specialists at property consultancy Vail Williams.
The report explores the latest trends across the region’s office and industrial market, as well as looking at changing occupier needs and how landlords/developers are delivering against these, evolving design, supply and rental tone, as well as key transactions.
Many are focusing on bringing people back into the workplace and have been starting to transition away from full remote working to a hybrid model as lockdown measures have eased.
Vail Williams Partner Guy Parkes believes it will take two to three years of transition before working practices become settled.
He said: “One thing we are certainly going to see is higher quality office space, with both occupiers and landlords recognising a mutual need to raise the bar.
“Fully fitted space and managed offices are showing strong demand as businesses, particularly SMEs, are hedging flexibility against cost premium.
“There is also the employee-led drive over climate change to focus on Environmental, Social and Governance (ESG) credentials in scrutinising buildings’ environmental performance and carbon emissions.”
Guy added: “Businesses are ‘right-sizing’ rather than downsizing, recognising that in their desire to bring staff back together in one place so as to preserve corporate culture, learning and encourage new ideas through collaboration might actually need more space.
“Some major players in the Thames Valley region won’t even look at buildings with an EPC rating of less than B, which means the future of a lot of low grade stock will need to be rationalised.”
Vail Williams reports an increase of 21 per cent in office enquiries for the first six months of 2021, alongside a 55 per cent decrease in the amount of space being sought.
Demand for quality fitted space is up 80 per cent, with a 13 per cent increase for serviced or managed space. Eight out of nine recent deals in Reading have been for fitted space.
Headline office rents across the Thames Valley have remained relatively stable, rising where the supply of top quality space is low, such as Windsor where rents are nudging £50 per sq ft, leading to rapid deals.
Reading Grade A rents, per sq ft, range from £33.50 to £39.50 and vary across the region: Heathrow £37.50; Maidenhead £37; Slough, Uxbridge £35; Theale £33.50; Bracknell £29; Basingstoke £28 and Newbury £23.50.
Firms are also starting to move work hubs to where their employees are based – for instance, Amazon taking 50,000 sq ft at Green Park, Reading.
This is not surprising since Vail Williams’ cost calculator formula puts the estimated annual cost per person per Grade A sq metre in the Thames Valley to be between £3,929 (Newbury) and £6,515 (Reading J10) whereas in London it’s around £17,000.
Guy, based in the Reading office, added: “We are on the cusp of a massive transformation in the workplace, impacting on locations, sizes, style, environmental impact and the introduction of smart tech – the biggest change since open plan offices were heralded the next big thing 40 years ago.”
With regard to industrial, the first six months of 2021 have highlighted the continuing trend for industrial demand outstripping supply, with a chronic shortage of industrial and warehouse units across the Thames Valley – no matter the age of building.
Occupier demand has remained high across asset sizes, and competition from data centre users continues to increase, putting added pressure on supply
Vail Williams Partner Charlie Nicholson said: “Occupiers cannot afford to be too choosy at the moment. Thanks to the huge rise in demand for industrial and warehouse units, land supply and associated values are expected to swell over the coming months.
“The rise in data centres going up in places like Slough is putting pressure on industrial supply pipelines. This is likely to have a knock-on effect, creating a shortage of buildings for traditional logistics and manufacturing in the market.”
Charlie said fast growing online shopping was driving demand for warehouse/distribution units, particularly for ‘last mile’ deliveries, while film and post-production companies moving out of West London were taking big box units.
As with offices, environmentally aware companies demanding green credentials and zero carbon status for buildings is driving high quality design, tempered somewhat by lack of supply. The move to upward development continues to maximise site value.
Land values are also increasing as exemplified by the levels attained for the HP site in Bracknell and the ex-ICI Paints site in Slough – so much so, that industrial developers are now competing with their residential counterparts where opportunities exist close to core transport junctions.
Headline rents are going up due to industrial demand, with quoting rents at Park Royal reaching £30 per sq ft for new stock. Otherwise Grade A prime headline rents are: Park Royal £18 per sq ft; Heathrow £16; Slough, Winnersh £14; Maidenhead £12.50; Theale £12; Reading £11.50; Bracknell Wokingham £10.50 and Newbury/Thatcham £10.
Read the full report here: https://vailwilliams.com/thames-valley-property-report-jan-jun-2021/
Notes to reporters
Vail Williams LLP is one of the largest independent providers of commercial and residential property advice in the UK.
Holder of the Gold accreditation from Investors in People, the firm provides property advice for landlords, occupiers, investors, developers and landowners in both the public and private sector, across the UK.
A full-service property consultancy, Vail Williams advises on a broad range of property issues – from lease advice, property valuation and planning, to asset management and property acquisition and disposal.
The firm is a specialist provider of business rates advice, having expanded its business rates team with the acquisition of business rate specialists Bisset Moffatt Hill (2016), and the general rating division of Ruddle Merz (2017).
Vail Williams employs 170 people, of which 50 are partners, based across its ten offices in the Midlands and south of England (Birmingham, Crawley, Woking, Heathrow, Leeds, London, Portsmouth, Reading, Southampton, Bournemouth).