There is currently 1.75 million sq ft of office space under construction across the UK’s major regional office markets, according to a new research report from CBRE. This volume equates to just over 600,000 sq ft due to be delivered each year between 2012 and 2014, which is down sharply on the long-run annual average of 1.9 million sq ft since 2000. Not only is this level of development low by regional historic standards, but it is also very low relative to development activity in the Central London office market, another measure of the twin-speed UK office market.
This relatively low level of space is being delivered into markets where Grade A space is increasingly in short supply. This will begin to have a material impact as 2013 progresses as steady levels of take-up over recent years have eroded supply levels of the very best office space to the extent that a requirement of 75,000 sq ft or over has a choice of less than two buildings all cities, with the exception of Birmingham.
Recent development activity in Southampton has been primarily focused on the out-of-town market with major pre-let or purpose built schemes. These have included new headquarters for Ordnance Survey at Nursling, B&Q at Eastleigh and Hampshire Police on Southern Road. The last building to complete in the city centre, in 2010 was the Regional Business Centre, a 67,700 sq ft scheme pre-let to Capita and Southampton City Council.
Since 2010 there has been no office space under construction, and new development is currently unlikely without a pre-let in place. The one major scheme that gained planning permission prior to property market downturn, Mayflower Plaza, will now proceed as a student housing scheme with construction commencing early in the new year.
However, two fresh schemes have now come forward to provide the next generation of space for the city. At West Quay, Development Securities has plans for the 60,000 sq ft Aqua scheme, with typical floorplates of c.10,000 sq ft. Meanwhile local developer Cumberland Commercial is bringing forward its 157,000 sq ft scheme called The Bond, located on a prime city centre site.
Commenting on the research, CBRE South Central Managing Director, James Brounger said:
“The risks associated with speculative development means that we are likely to see a two tier market place with occupiers either taking a view on cheaper but poorer quality space or paying higher than the prevailing rents for better quality, energy efficient new buildings via a pre-let.”
