The Thames Valley has five years surplus office supply and rents are not expected to rise until 2005.
A report presented to an Investment Property Forum seminar last week shows that the Thames Valley market is in an even worse state than previously feared, with 6.7m sq ft or a sixth of all office space in the region vacant and rents in some areas down by 20%.
The research, put together by Property Market Analysis, Jones Lang LaSalle and HSBC showed that availability rates along the M4 from Hammersmith to Reading are now at their highest ever levels.
Although the total amount of space being marketed in the Thames Valley stands at 4.5m sq ft (418,000 sq m), implying a vacancy rate of 13%, another 1.2m sq ft (111,500 sq m) is surplus to requirements, reflecting a vacancy rate of 17%.
In 1990, vacancy rates peaked at 14%.
Chris Hiatt, head of office agency at JLL, told the seminar his team had identified this space as a “grey or shadow” market of grade A buildings or land identified as corporate accommodation not being marketed but potentially available, such as the WorldCom space in Reading.
The figures could be even higher, following Prudentials announcement this week that it will move some of its call centre operations to India, laying off 850 people in Reading over the next two years.
Pru occupies over 250,000 sq ft (23,225 sq m) in Reading town centre and agents speculate that over 100,000 sq ft (9,290 sq m) could be brought to the market.
Hiatt added that, including this grey space, nearly five years average annual take-up was available (excluding historically high levels for 2000).
Hiatt admitted to EG: “It will be a tough market for the next two years. We forecast that rents will rise again between late 2004 and early 2005.”
Although headline rents in the Thames Valley have fallen by as much as 10% in some areas, net effective rents – which factor in incentives – fell by almost double these figures.
According to JLL, rents in Slough and Bracknell, including incentives, have fallen to £25.50 per sq ft – a net fall of 20%.
EGi News 07/10/02
