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Guy Grantham, Director, Colliers Int'l Provides His South and South East Market Comment

Guy Grantham, Director, Colliers Int'lWhile the Central London office market has been relatively insulated from the worst of the economic and commercial property downturn, the South East office market has suffered from subdued levels of take-up in 2011. Not surprisingly with the continued uncertainty particularly in the Euro Zone we expect to see this trend continue into 2012 across all the majority of the region. Take-up across the major M25 centres in 2011 was just over 8% down on the equivalent 2010 figure coming in at 3.9 million sq ft compared to 4.2 million sq ft over the previous 12 months. Both of these figures are down on the 2009 total of 4.3 million sq ft.

The market will continue to be driven by lease events and speculative development will only take place in the established office locations where existing supply constraints allow. There may be scope for less costly refurbishment opportunities, with the option of delivery into a more positive environment in 2013, as opposed to more complicated and comprehensive redevelopment programs with a 24-26 month delivery schedule.

Many successful and established corporates are continuing to tread water in their existing locations rather than undertake costly and complicated relocations. With capital investment still broadly off the agenda for occupiers, many will look to regear existing leases or renegotiate with existing landlords who will be equally keen to avoid empty rates liability and likely extended void periods.

Vacancy rates remain stubbornly high in the majority of centres with only locations where demand has been above average or the development pipeline has failed to deliver, such as such as Chiswick Richmond, Hammersmith and Wimbledon. Thames Valley availability rose in the final three months of 2011 but still remained below where it began the year.

Rental levels have remained broadly flat with exceptions such as Cambridge, where competition for limited grade A product within the city centre which pushed rental annual percentage rental growth into double digits during the course of 2011.

On a positive note Companies like Astellas Pharma have taken the positive decision to drive competitive market terms, when they acquired 2000, Hillswood Drive, Hillswood Business Park, Chertsey Surrey ( a 100,000 sq ft Grade A office building with an additional 6.13 expansion site). We would hope to see 2012 herald more such ‘opportunistic’ transactions where competitive terms being offered by landlords reap rewards.

Posted by Michael Gillespie (wantspacegotspace Limited) on 24th January 2012 (updated 09/04/2013)

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