Activity in the Thames Valley’s office and industrial markets has been buoyant in the first quarter of 2022, according to research by Vail Williams.
Its Thames Valley Property Market Report for Q1 suggests lease events and pent-up demand have driven healthy levels of activity but warns external influences, such as the war in Ukraine, lingering covid-19 effects, rising inflation and a shortage of industrial land, will bring about both opportunity and challenge during the rest of the year.
Office occupiers, the report suggests, are seeking high-quality premises but on a smaller footprint. On average, they are taking 66 per cent less space.
Partner Guy Parkes, one of the report’s authors, said: “The workplace is increasingly being recognised as not just a place to do work but also as a powerful tool to bring companies and customers together to enhance collaboration, learning and mentoring, as well as to attract and retain talent.
“With this in mind, 2022 could be the year that businesses bite the office bullet and commit to a future workplace strategy to meet their future needs, as well as those of their people and clients/customers.
“A backlog of potentially, nearly 3.8 million lease events for 2021 and 2.55m sq ft coming up in 2022, could see a tsunami of office moves on its way, and the potential for over 800 transactions this year.
“More than half of tenants will have renewed or extended their leases short term, while they took stock during the pandemic. This pent-up demand will certainly force the pace of office moves in 2022 as companies take the opportunity to right-size and re-calibrate the workplace.
“We expect more companies to revisit their accommodation plans to provide the best workplace to attract people, as the war for talent continues – particularly in the growing technology and pharmaceuticals sectors.
“Because occupiers are taking less space but with the same budgets, their money is going much further and they are prepared to spend more for a better standard of space. As a result, office rents in Reading, Reading outskirts, Watford and Windsor are all increasing, reaching £45 per sq ft. Category A+ fitted suites are attracting further premiums.”
Demand in the industrial market is being driven by logistics, last mile delivery, film production and data centre space.
Partner Charlie Nicholson said: “The region continues to have its sector-based location pockets – laboratory, technology and R&D space at Harwell Campus, film production in Reading and data centres in Slough with industrial demand for all, increasing significantly.
“E-commerce and last mile delivery demand remained high and we do not see this changing as consumer habits continue to feed the industrial sector, with around a third of retail transactions now happening online. Demand for lab and R&D space soared, biting into traditional industrial and logistics locations such as Reading, Slough and Heathrow.
“The expansion of the film industry out of West London to the Thames Valley has been internationally significant, with the likes of Longcross, Pinewood and Shepperton Studios all benefitting from the major film studios basing productions in the UK.”
Rising costs, he said, will mean increased rents. However that could mean some industrial occupiers being squeezed out of the West London and Heathrow/Park Royal markets, towards the Thames Valley.
He added: “As ever, supply of land for industrial development remains a key challenge in the Thames Valley, putting pressure on occupiers, landlords, investors and developers.
“Industrial land values are continuing to match, and in many areas exceed, residential levels.”
The full report can be seen here.
© Thames Tap (powered by ukpropertyforums.com).
Sign up to receive your free weekly Thames Tap journal here.
