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News Release

Londcon

Shortage of Grade A Space could trigger rental ‘hot spots’ in the Western Corridor region according to Jones Lang LaSalle


London, 17th December 2009 – Research recently undertaken by global real estate advisers Jones Lang LaSalle has identified a number of towns in the UK’s Western Corridor region where shortages of Grade A office accommodation could possibly fuel early rental growth and potentially trigger new speculative development and increased pre-letting activity during 2010.

Jones Lang LaSalle anticipates rental ‘hot spots’, in those towns (such as Reading and High Wycombe); which are predicated to see a rise in achievable rents and largely where Grade A supply is particularly constrained and occupier demand increasing.

Commenting on the research findings, Guy Parkes, head of Jones Lang LaSalle’s Western Corridor office, said: “We anticipate rental growth returning in the second half of 2010, with overall growth of 0.6% across the Western Corridor region by the end of the year. The tipping point will begin in town centres, which currently represent good value in terms of rental growth projections, for commercial property investors.  Equally, corporate occupiers, who may be considering relocating to a town centre, should make use of this window of opportunity whereby they are able to capitalise on the current competitive pricing and rental packages available to secure premises on preferential terms before they are priced out of the market.”

Jones Lang LaSalle’s research also shows that there has been increased activity in occupier demand for town centre locations in the Thames Valley.  Over 2009, 57% of deals done have been in town centres, whilst out-of-town areas account for 43%.

Reading, in particular, has a limited pipeline of Grade A supply in the town centre, representing only 17 months supply remaining based on the rate of take-up during 2008 and 2009. However, with a growth in demand equating to a 95% increase in enquiries since the start of the year, Jones Lang LaSalle anticipates a quicker absorption rate going forward, which will further reduce supply, thereby fuelling rental growth.

Guy Parkes added: “There are only two newly constructed Grade A buildings in Reading town centre, comprising 113,000 sq ft at The Blade and 60,000 sq ft at Reading Central, which could easily satisfy the weight of current requirements. It is therefore not surprising that office rents have remained relatively robust in the town during the recession.”
 
Guy continued: “Other market trends we may see, could arise from those occupiers who perform highly transactional types of work, (such as call centre employees), who do not depend on particular ‘locations’ to fulfil their job requirements and could achieve significant cost savings by moving out-of-town. In towns such as Bracknell, Camberley and Maidenhead, where there are higher levels of supply, there will continue to be less rental volatility, which will be beneficial for businesses keen to maintain their occupancy costs at sustainable levels.  It is here where rents are expected to remain stable for longer.”

Other ‘rental hotspots’ identified by Jones Lang LaSalle’s research include Staines which has just ten months Grade A supply remaining; Chiswick with 26 months supply and High Wycombe, which has 23 months supply available. These supply levels are set against only approximately 153,000 sq ft of new development scheduled to complete in 2010 across the Western Corridor region. Jones Lang LaSalle anticipates improving occupier demand in the town centres may be the catalyst to bring forward further development starts from 2011.