A solid year of take-up that saw it out-perform the 10-year average in 2016 meant that Reading provided 25% of the region’s total take-up, according to Lambert Smith Hampton’s 2017 Thames Valley Office Market Report.
- Reading take-up returned to the long-term average following 2015’s outstanding total. 94% of let space was grade A and Reading provided 25% of all Thames Valley take-up.
- With 1.9m sq ft available and several schemes completing, Reading has the second highest availability rate in the Thames Valley, however, this still represents a fall from over 2m sq ft one year ago.
- Following 615,000 sq ft being brought to the market in 2016, summer 2017 will see the completion of a further 190,000 sq ft of new space at 2 Forbury Place.
- Quality grade A space is attracting rents of £36.75 per sq ft in the town centre and £35.50 per sq ft out of town.
Tom Fletcher, head of LSH’s Reading office, explains: “Despite uncertain times, Reading has performed strongly in 2016 and even more strongly in Q2 2017. Those buildings that offer that little bit more quality and amenity continue to attract the most attention.
“The majority of interest has been for 5-15,000 sq ft churn, but actually, we’ve seen many more 30,000 sq ft plus requirements circulated in recent weeks.
Demand
Take-up in 2016 was 436,279 sq ft, returning to the 10-year average following 2015’s outstanding total of 581,639 sq ft (dominated by SSE’s 186,000 sq ft acquisition of 1 Forbury Place). Notably, Reading provided a quarter of the Thames Valley take-up for the year.
A strong Q2 has delivered H1 2017 take-up of 235,987 sq ft – putting the town on course for another above-average year.
Grade A space accounted for 94% of all take-up in 2016, reflecting occupiers’ desire to provide optimum space for their employees alongside a continuing erosion of grade B space from the market.
Supply
At 19%, Reading has the second highest availability rate in the Thames Valley, with 615,000 sq ft of new supply hitting the town centre market in 2016. However, total availability has actually fallen from 2.2m sq ft in Q1 2016 to 1.9m sq ft today.
This is due to notable demand, paired with approximately 200,000 sq ft leaving the market for alternative uses.
Rental values
Town centre rents have moved from £34.00 per sq ft at the end of 2016 to £36.75 per sq ft at the end of Q2 2017.
Out-of-town, a similar pattern was seen, with end-2016 prime rents standing at £35.00 per sq ft and moving to £35.50 per sq ft in Q1 2017.
Outlook
We expect a consistent churn of sub-20,000 sq ft lettings in 2017 resulting in a total of higher than the average annual take-up. Demand will be dominated by tech, financial and pharmaceutical occupiers and the vast majority of take-up will be focused on amenity-rich grade A space.
Given the significant increase in rents seen from the end of 2016, we can expect them to steady, increasing to £37.50 per sq ft by the end of 2019.
