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News Release

London

2010 Western Corridor office take-up bounced back

West London Grade A Office vacancy rate now at its lowest for 10 years


London, 14th January 2011 – Office take-up volumes bounced back in 2010 in the Western Corridor region with almost 2.1 million sq ft of space let, reflecting an increase of 65% in comparison to 2009 but down slightly (-12%) compared with the five year average according to figures released today by Jones Lang LaSalle.  Take-up in Quarter Four 2010 (Q4) reached over 410,000 sq ft, with key deals including HTC Group’s purchase of the freehold of Salamanca in Slough (69,700 sq ft) and JP Kenny acquired 68,200 sq ft at Compass Point, Staines.  Take up in the final quarter was however down by 58% in comparison to the very strong activity witnessed in Q3 2010 which was dominated by a number of large deals. 

Positively, most office leasing activity in 2010 took place in the sub 25,000 sq ft segment, with an average deal size of 19,700 sq ft, compared with 13,850 sq ft in the previous year.  Occupier activity continued to be driven by the Manufacturing and Service sectors, which accounted for 79% of take-up in Q4 and 77% over the year as a whole.  The IT sub-sector was most active in Q4, taking over 180,000 sq ft, or 44% of take-up. 

James Finnis, Head of National Offices at Jones Lang LaSalle, said: “Office take-up in the Western Corridor region was relatively resilient in 2010 and a marked improvement on 2009, however the deals were generally driven by lease events and consolidation rather than expansion.  The focus of occupier activity remained in town centres which accounted for over two thirds of last year’s total take-up.  The economic outlook remains mixed with limited but stable GDP growth anticipated in 2011.  Grade A space remains in demand with occupiers taking advantage of the opportunity to upgrade their space at competitive packages; take-up of this space totalled over 1.2 million sq ft which is 60% of the total take-up during 2010.”

According to Jones Lang LaSalle’s research, office supply fell slightly in Q4 to 12.1 million sq ft, reflecting a vacancy rate of 14.2%.  Despite falls of -3.7% the Thames Valley remained significantly more oversupplied than West London with a vacancy rate of 20.1% against 8.5% respectively.  This is further pronounced with regards to Grade A supply, which remained at just 3.3% in West London whilst in the Thames Valley Grade A vacancy fell from 9.4% in Q3 to 8.6% in Q4. 
Across the Western Corridor office market, rents increased 1.5% over the final quarter driven by upward pressure in Reading, Basingstoke, Camberley, Uxbridge and Hounslow.  Compared with previous quarters, rental growth picked up with the majority of the year’s rental growth witnessed in the last three months of the year.  Incentives were stable at 30 months rent free on a 10 year lease in the Thames Valley but fell to 24 months in West London, down from 27 months in the previous quarter.

Finnis concluded:  “The result of the Grade A focus on take-up in 2010 is the rapid reduction of the Grade A vacancy rates; the West London vacancy rate is now at its lowest for 10 years.  The development market is starting to react to this and we are seeing the beginning of the speculative development pipeline in certain key locations.  Assuming occupier demand remains robust we are forecasting a pinch point in Grade A supply in a number of centres in 2012 – this will drive rents forward with headlines rents showing real growth and incentive packages reducing rapidly.”