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Flexible office space is key trend in the Thames Valley

Oxford Commercial Property Agency News

Oxford commercial property agency working with commercial landlords and tenants. Start-ups to established businesses. Office, retail, industrial and leisure sectors. 

Flexible office space is key trend in the Thames Valley

Amy Williams

The Western Corridor office market enjoyed a solid 2017, according to JLL, with take up rising 19% compared with 2016, totalling 1.9m sq ft, and investment volumes hitting a historic high of £2.9 billion, a year-on-year increase of 11%.

JLL said that with strong market fundamentals and the Elizabeth Line operational next year, the Western Corridor market is well placed for the year ahead.

JLL said there was a significant expansion of co-working and serviced office operators acquiring space, which accounted for 18% of leasing transactions.

WeWork was the most active operator in this sector and acquired almost 100,000 sq ft in two transactions in Hammersmith during the year. JLL expects further growth in this sector in 2018 as the option of flexible space alternatives become more prevalent. However the 10-year term remains the most common lease length across the Western Corridor.

The primary focus for occupiers in 2017 was a preference for well-located, good quality space, JLL said.

Grade A take-up accounted for 85% of deals in 2017 and it was anticipated that this trend would continue into 2018 with occupiers continuing to pursue high-specification buildings. It is believed that 2018 will witness some major deals, in excess of 75,000 sq ft, which could see annual take-up in the Western Corridor surpass 2m sq ft.

Supply levels flattened in Q4 2017, with Grade A vacancy falling below 8% and it is expected to moderate further over 2018. Looking further ahead vacancy should continue to decline in 2019 and 2020 as the number of active speculative development schemes reduce.

JLL said: “This will impact both occupational and investment market as tenants will look in 2019 towards pre-lets to secure space and developers turn to focus on redevelopment and refurbishment opportunities.”

James Finnis, head of south east office agency at JLL, said: “2017 saw an improved leasing picture in the Western Corridor. However, corporates remain cautious and deals have to be carefully crafted to achieve success. Occupiers are driven by their increasingly vocal employees who are demanding well-located, well-specified, creative space with amenities.

“The growth in the co-working and serviced office offer is a product of occupiers working on a core and flex model. With political and economic uncertainty this desire to have flexibility will grow and we see the provision of flexible space in a multi-let building as increasingly essential. The Elizabeth Line becomes operational in the Western section next year and we see the permeability of the Western Corridor into Central London, via Crossrail, as a key plank for future growth in this market.”

JLL highlighted that the Western Corridor investment market reached record volumes in 2017, with £2.9b transacted and four deals over £100m. A key focus was the trading of prime assets as well as ‘parkmania’ with transactions on business parks accounting for close to 40% of the transactional volumes.

Overseas investors continued to be active in the Western Corridor, accounting for 55% of transactions in 2017, aided by the weakening of sterling over other major foreign currencies. UK investors remained acquisitive, accounting for more than double the number of transactions that overseas investors recorded.

Angus Minford, director of capital markets at JLL, said: “2017 was a record for transactional volumes heavily assisted by a flurry of business park transactions, with some of the best parks in the Western Corridor being acquired by foreign capital. Looking forward, we expect the trend of foreign investment to continue into the regional markets.

“This demand will continue to focus on prime assets with investors continuing to seek steady and predictable income streams. The availability of suitable product will remain thin with motivated sellers in short supply. Demand for ‘risk on’ assets will remain tempered against the backdrop of Brexit negotiations.”

Photo by LinkedIn Sales Navigator on Unsplash