West London & Thames Valley office market retains strong fundamentals in face of Brexit

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September 12, 2018

JLL's annual West London and Thames Valley seminar, held today, highlighted the strength of the region's office market amid political and economic uncertainty, underlining its attractiveness for both investors and occupiers.

JLL's research showed that office investment in the region is likely to exceed �2bn in 2018, reflecting the sustained demand from both domestic and international buyers who continue to target best in class assets.

The office leasing market has performed at a steady rate and is set to surpass 2 million sq ft of take-up by year end. JLL cited a shift in the amount of space that occupiers are signing up to, with the average deal size in the region moving from 22,000 sq ft in 2008 to 15,500 sq ft in 2017. Occupiers are taking well located, good quality space and in H1 2018, just over 70% of deals were below 20,000 sq ft as tenants prioritise quality rather than quantity.

The provision of flexibility is now a key consideration for the region's landlords and occupiers. JLL highlighted that over the past 12-18 months leasing activity from service operators has risen significantly. In H1 2018 alone, there was 175,000 sq ft of flexible space leased, representing 18% of total take up, with the majority of space transacted in the Thames Valley.

JLL highlighted the autotech industry as a key sector for growth as the wider Thames Valley is at the heart of the developing battery technology sector in the UK. With the growth of electric vehicles, powering these new vehicles will require new and innovative battery technology. The Life Sciences cluster in the wider South East is also increasing in strength, with occupiers wanting to be located close to their suppliers, customers and competitors with access to their international markets via Heathrow.

Jon Neale, head of UK research at JLL, said: "The Western Corridor office market remains the most vibrant and robust commercial location outside of central London. The predicted pace of job creation in the region, especially from the expanding tech and communication sectors, should translate to continued demand for space - underlining its strong fundamentals which should mean it is well-placed to weather any Brexit related storms."

James Finnis, head of South East office agency at JLL, said: "Reducing supply and growing net absorption of space is a product of solid demand and the limited development pipeline. As the number of new schemes commencing declines, there is a gap emerging, with the pipeline in 2019 and 2020 looking extremely limited.  Looking ahead, occupiers may have to pre-let off plan to secure larger space which the spec market is not delivering.  There are some real growth sectors in this geography from Life Sciences to Autotech which will help to deliver new demand."

Angus Minford, director, South East office investment at JLL, added: "Investors continue to focus on prime/core assets, seeking steady and predictable income streams. However, the availability of suitable product remains low and motivated sellers remain in short supply. As a result, the number of off-market transactions has risen. In contrast to last year, where foreign investors accounted for the majority of volumes, the first half of 2018 has been dominated by UK investors, a pattern which has been replicated across the UK. Although the expectation is that overseas investors will be increasingly active in H2 2018, redressing some of the balance. "

For more information on JLL's South East Office Agency and Investment teams visit www.jll.co.uk