South East office market on the up following a tough 2021
SHW’s South East Office Focus Q3 reports that, following a tough 2021, the first half of 2022 has seen a dramatic improvement for many locations across the region.
Tim Hardwicke, SHW’s partner and head of agency, comments: “A number of companies have relocated to improve the quality of their offices, whilst taking the opportunity to downsize due, in part, to continued home working. This has been mainly driven by lease events, however, there have been a number of notable deals as a result of companies expanding.
“It’s encouraging to see firms investing in buildings to provide staff with the best quality space they can afford and, as a result, we are seeing an increasing pattern of staff wishing to return to the office rather than being directed to do so. Despite this, we predict an ongoing element of working from home with the ‘new norm’ of 3 or 4 days a week in the office.”
In Bromley, the first half of 2022 reported zero take up of office space. Q1 and Q2 saw only 40,000 sq ft of logged demand and 100,500 sq ft available. However, the start of Q3 saw two new lease events at T Bromley with RSM and Hanson Regan taking a combined 8,000 sq ft at the recently refurbished office.
In Croydon, although only 16,500 sq ft has been transacted so far this year, there has been a total of 1.37 million of logged demand over the last four quarters. With availability at 525,000 sq ft, we expect continued strong take up with rents remaining high at around £34 per sq ft.
While in Redhill & Reigate, take up is also relatively low at 12,000 sq ft. Logged demand is at 360,000 sq ft and availability at 200,500 sq ft, so we will likely see remains remaining lower than 2020’s highest figure (£31.50) with quoting rents at £29.50 per sq ft.
Conversely, in Burgess Hill & Haywards Heath take up has almost tripled that of the whole of 2021, with 66,000 sq ft already transacted this year. With 180,000 sq ft of logged demand and 42,000 sq ft available, rents may rise from the static £24 per sq ft seen over the last four years.
Similarly, Gatwick & Crawley has seen a dramatic uplift in take up, at almost triple figures in H2 2022 compared with the whole of 2021. Rents will push to the mid to high £30s when The Create Building completes construction (up from last year’s £27.50 per sq ft). In the first half of this year SHW completed the largest office letting in Crawley for some three years, with Bramble Energy taking the whole 33,978 sq ft at Atrium Court. This was topped by another 58,000 sq ft letting carried out by the office agency team.
In another strong market, Horsham’s take up rate is already nearly topping 2021 figures, currently standing at 58,000 sq ft. Availability is currently half that of logged demand and rents are predicted to rise from the £20 per sq ft seen over the last three years. In parallel, Eastbourne and the surrounding areas have seen a match in 2021 figures already and, with only 5,000 sq ft available, demand is far outstripping supply, pushing the quoting rent up to £19 per sq ft – with this figure already being achieved in Polegate. Littlehampton, Bognor & Chichester’s take up rate is also currently matching the 2021 figures however, demand has tailed off at present.
Worthing & Lancing has also made a dramatic U-turn this year. Based on zero take-up in 2020 and 2021, 5,000 sq ft has already been transacted and logged demand is double that of supply, pushing the highest quoting rent to £17.50 per sq ft, compared with the last five years’ highest rents achieving around the £13 per sq ft mark.
Lastly, Brighton & Hove, which saw take-up figures bounce back last year, has been performing very well with take-up 30,000 sq ft over 2021’s figures already (2021: 70,000 sq ft / 2022: 100,000 sq ft). Agreements for lease have also been signed on 83,000 sq ft at Edward Street Quarter which will complete upon PC of the building later this year. Logged demand for the last four quarters stands at over 1.2 million, with availability at 315,000 sq ft, pushing quoting rents up to £37.50 per sq ft (2021 highest rent was £29 per sq ft).
Tim concludes: “Despite the increase in working from home. Long-sighted investors are seeing the advantage of office occupation and the versatility of the buildings and are still keen to acquire assets in this sector. Many landlords are taking ESG very seriously as this becomes a key, driving force for occupiers wanting to lease and buy building. This is also true for property companies looking at purchasing investments.”