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News Release

London

Western Corridor 2014 office investment volumes hit £1billion but occupational take-up falls below the 5 year average says JLL

Named demand continues to grow in the South East


​LONDON, 14 January 2015 – JLL data indicates that over £1billion of real estate transacted in the Western Corridor office market in 2014, with £314million of this in Q4 alone.

Office take-up across the Western Corridor fell to 2.03million sq ft, 6% below the 5 year average of 2.17 m sq ft and significantly below the 2.9million sq ft transacted in 2013. Take up in 2014 was dominated by smaller deals with only six deals over 50,000 sq ft.
Reduced take-up volumes came as a result of delayed decision making by corporate occupiers.

Named demand continues to grow and now stands at 5.3m sq ft, up 78% year-on-year from 3.0m sq ft, with the services sector driving demand, accounting for 48% of enquiries.

JLL statistics indicate that General Election years have delivered substantial increases in take up volumes, as occupiers finalise their decision making before and after the election result. Take up in 2005 was 2.75m sq ft a 96% increase on the 1.4m sq ft transacted in 2004 and in the 2010 General Election take up went up to 2.1 m sq ft a 62% increase on the 1.3m sq ft transacted in 2009.

Supply continues to be eroded due to office take up and residential conversions through permitted development rights. Total supply now stands at 11.4million sq ft, equating to a vacancy rate of 12.7%. Grade A vacancy has fallen and now stands at an average of 5% across the region although in West London it is only 2.8%. There is 1.5million sq ft of space under construction on a speculative basis, which represents a replacement rate of just 1.7% of total stock.

James Finnis, Head of South East Office Agency at JLL said: “Whilst occupiers will continue to be cautious in 2015, and the General Election in May will lead to a pause in activity, we are forecasting an increase in take up volumes by over 25% as the pent up, named demand transacts. Tenant demand is driven by attracting existing and new employees so the requirements will focus on the best stock – with either an integrated public transport network or an excellent car parking ratio and local amenities.

“The leap in take-up seen in the previous two General Election years is counterintuitive. However, it tied in with a period of economic recovery and the election served as a focus for occupiers. To this end, we’re predicting a positive outlook for 2015, with a busy Q1 and H2, when we expect to see more decisions made by occupiers who form part of the pool of named demand.”

Angus Minford, Director, Capital Markets at JLL said: “2014 was a strong year for the Western Corridor investment market with a number of trophy assets transacting including One Reading Central for £95 million, 77 Fulham Palace Road, Hammersmith for £82 million and Ealing Cross for £67 million.

“The market in 2014 was dominated by the UK Institutions, with strong interest also evident from US Private Equity. Our prediction for 2015 is that demand will be high and this will emanate from a more varied investor base. Pricing will continue to harden with assistance from continued occupational take up and evidence of rental growth.”

Vicky Heath, Associate Director, UK Research at JLL said: “With continuing strong demand for Grade A supply, which is in short supply in some core markets, the Western Corridor market saw average prime rents increase by 6.0% during 2014 to stand at £31.54 per sq ft.

“JLL rental growth forecasts show the Western Corridor outperforming UK regional cities, averaging 4.6% per annum over the period 2015-18.”