M&G sees signs of larger office lettings

M&G Real Estate is seeing office occupier requirements increasing in size across the country and is optimistic the Thames Valley will see more larger lettings.

Thames Tap spoke exclusively to Aaron Pope, director asset management for the property investment firm, about trends he is seeing in the market.

He reports more 20,000 sq ft+ requirement are coming through in central business districts (CBD) with the focus on Grade A, best-in-class space, driven by a combination of the war for talent and the battle to get staff back to the office.

He said: “I think we know the reasons why people do need to come back into the office with the advantage that gives and I think that in the Thames Valley we are looking at some of the larger enquiries coming back.

“We had the success with Rapid7, an occupier who moved to Forbury Place from a business park in Theale.

“At the moment there’s a lot of smaller enquiries in the Thames Valley, especially for Reading at the moment, and we are just monitoring and waiting for the bigger ones to come through, those of 20,000 sq ft and above rather than 3,000-7,000 sq ft.

“They are definitely coming through. We have seen them starting to come through in Manchester and Birmingham but it would be nice to see a few more of those coming through within the Thames Valley.

“From speaking to the various agents, optimism is still quite high, viewing levels are strong and encouraging, but they acknowledge it is taking a long time from the very first viewing to getting that deal completed and done.”

The reduction in size requirements had occurred over the Covid period. Pre-Covid, M&G had spoken to a number of occupiers in Birmingham, seeking 20,000 sq ft or more but post-Covid their requirements had shrunk to 12,000 – 15,000 sq ft.

Mr Pope added: “So we did see a good example of the enquiry size shrinking but what then happened was they were all taking the best-in-class offices in that market.”

Staff, he said, are increasingly being encouraged back to the office and that is increasing the size requirement. After occupiers like Twitter, Facebook and Apple reversed their working from home policies, others are following suit but amenities, ESG and wellness are now the first things occupiers ask about. As a result there is now little appetite for secondary stock.

The CBD market is now the focus of M&G’s activity rather than business parks. The firm, which as Prudential, built Green Park in Reading in the 1990s, believes CBDs are now where the demands of tenants are driving the most movement.

M&G has sold a number of business parks including Green Park, Bedfont Lakes and The Heights in Weybridge. Nowadays its assets in the Thames Valley include Forbury Place and Abbey Wharf in Reading, Tor and the Pearce Building in Maidenhead, 50 Windsor Road in Slough, Park View in Uxbridge, the Friary Centre and London Square in Guildford and Strata in Staines.

After selling fully-let Apex Plaza in Reading, M&G acquired the Forbury Place development of Buildings 1 and 2 and the neighbouring former Reading Central building it renamed 3 Forbury Place.

Mr Pope sees the three buildings as a mini-business park itself with amenities on the doorstep but said even between the two later buildings (1 and 2), the increasing requirements for amenities are evident.

He said: “A really good example of showing how quickly tenants’ demands and the whole drive to ESG, wellbeing and more facilities is changing, is looking at the difference between Forbury 1 and Forbury 2.

“When we built Forbury 1 (now sold to Citi Private Bank) we had the changing facilities and the bike facilities. But within that short period of time (between development of the two buildings), probably less than two years, if you then look at what we did with Forbury 2, the changing facilities have tripled in size and the bike facilities are absolutely enormous.

“There’s an atrium and all these facilities. The changing facilities are more like a high-end gym.”

All the main accountancy practices are now in Reading town centre. The last of them to come into town was KPMG which relocated from Theale to Forbury Place.

A key factor in chasing higher standards is younger employees’ readiness to change employer. Mr Pope, who is on the board of Reading UK, said big employers explained the difficulties in keeping staff at a recent meeting put on by the economic development company.

He said: “Whereas people like me would stay in their jobs for 10-15 years, the new generation of workers don’t think twice about moving firms within two years and continuing to move.

“And so some of these firms are really facing that war for talent and to be able to maintain staff and attract new staff, you can’t just be sat in the office space that you traditionally had.

“That generation seem to not have any concerns about moving jobs, moving roles or leaving a company. It was mentioned by a few of the big firms in the Reading meeting that it’s a lot harder to retain your staff.”

Sign up to receive your free weekly Thames Tap journal here.