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Say Jones Lang LaSalle in office latest market research
London, 18th January 2013 – Latest office market research released by Jones Lang LaSalle shows that overall, 2012 was a solid year for the Western Corridor. Total take-up across the market reached 2.0 million sq ft in line with the 5-year annual average. Activity was dominated by the West London sub-market where annual take-up totalled 1.15 million sq ft, surpassing the 5-year annual average of 963,500 sq ft. In contrast, annual take-up for the Thames Valley stood at 843,900 sq ft, down 22% on the corresponding 5-year average.
Total supply across the Western Corridor increased by 7% y-on-y driven by a release of second hand Grade B space in the Thames Valley. The West London market continues to have a shortage of Grade A space. Despite a number of speculative schemes completing during Q4 and moving into the supply figures the West London Grade A vacancy rate remains low at 2.9%.
The development pipeline remains constrained with 540,000 sq ft on site on a speculative basis across the Western Corridor and due to complete during 2013. Beyond this, limited starts on site are expected, particularly impacting on the already undersupplied West London market.
James Finnis, Head of South East Office Agency at Jones Lang LaSalle said: "The Western Corridor office market has delivered a positive performance in 2012. Overall take up has increased to fall in line with the 5 year average but West London has outperformed driven by two major deals - the Aker letting at Chiswick Park and IMG acquiring 5 Longwalk on Stockley Park. These deals helped to deliver the increase in take-up and illustrate occupier preference for Grade A space. Grade A vacancy rates are historically low in many centres in the Western Corridor and the Development Pipeline is not filling the gap. This mismatch between supply and demand is feeding through to rents and we are forecasting further rental increases in a number of undersupplied locations."
Average prime rents in the Western Corridor have held up well, increasing by 4.8% y-o-y driven by the West London market where rents have grown by 8.8% over the year.
The most encouraging story for the region is the increase in named active demand which puts a very positive outlook on the next 12-24 months in the Western Corridor. Active demand in Q4 was up 42% on the same period last year and this upward trend looks set to continue.
The 2012 investment transactional volume in the South East reached £795 m. This was approximately 50% below the 2011 figure although this did include the Green Park and Chiswick Park transactions (over 50% of the annual volume). In Q4 2012, notable transactions included the sale of Chiswick Green to PRUPIM for £48 m, 6.25% IY and 5 Longwalk, Stockley Park to a private overseas investor for approx. £42 m, 6.4% IY.
Commenting on the investment market, Angus Minford – Director, National Investment at Jones Lang LaSalle said: “The Western Corridor market is now attracting healthy interest from a wide range of investors seeking assets with varying risk profiles in both the in and out of town markets. The focus remains on specific locations. We expect investor appetite to continue to grow over 2013 as the imbalance between the limited supply of Grade A space in key locations and growing occupier demand increases.”
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