Flight to quality drives Thames Valley commercial property market

THE FIRST QUARTER of 2022 has seen commercial property activity in the Thames Valley remain buoyant, according to a property consultancy.

Vail Williams says demand was driven primarily by rental events and pent-up demand, with businesses seeking high-quality premises in a smaller footprint.

But there are also challenges from outside influences such as the war in Ukraine, the continuing ramifications of covid-19, rising inflation in the UK and a shortage of industrial land.

This is revealed in the company’s Thames Valley Q1 2022 property market report.

Reading-based Vail Williams partner Guy Parkes, one of the report’s authors, said he believed companies were now planning with more certainty as investors and developers prepared their assets for the market and that companies were looking to make better use of technology to make their workspace lighter and greener.

He said: “The workplace is increasingly recognized not only as a place to work, but also as a powerful tool for bringing businesses and customers closer together to improve collaboration, learning and mentoring, as well as to attract and retain talent.

“With this in mind, 2022 could be the year companies bite the bullet from the office and commit to a future workplace strategy to meet their future needs, as well as those of their employees and customers/customers. .”

Moving companies were looking to reduce their footprint, taking up about two-thirds less space than before.

“A backlog of nearly 3.8 million rental events for 2021 and 2.55 million square feet to come in 2022 could lead to a tsunami of office moves and the potential for more than 800 transactions this year,” Mr. Parkes said.

“More than half of tenants will have renewed or extended their short-term leases as they take stock during the pandemic. This pent-up demand is sure to accelerate the pace of office moves in 2022 as companies take the opportunity to resize and recalibrate the workplace.

“We expect more companies to review their hosting plans to provide the best place to work to attract people as the war for talent continues – especially in growing tech sectors. and pharmacy.”

And that strategy is changing the market, as Mr Parkes said recent office deals in the Thames Valley found occupiers were paying on average nearly 40% more in headline rents than their previous walk-in rent, while taking up approximately 30% less space.

“Because occupants are taking up less space but with the same budgets, their money goes a lot further and they’re willing to spend more for better space,” he said.

“As a result, office rents in Reading, Reading outskirts, Watford and Windsor are all rising to £45 per square foot. Suites equipped with category A + attract new premiums.

And demand in the Thames Valley remains strong, with demand for logistics, last mile delivery, film production and data center space continuing through 2022, says the report’s co-author, Charlie Nicholson.

“The region continues to have its pockets of sectoral location – laboratory, technology and R&D space at the Harwell campus, film production in Reading and data centers in Slough with industrial demand for all increasing significantly,” a- he declared.

But, he warned, with rising inflation impacting construction costs, the market will need to see continued increases in rents to support construction prices and the purchase of land, which could mean more rent increases for industrial occupiers this year.

He added: “As always, the supply of land for industrial development remains a major challenge in the Thames Valley, putting pressure on occupiers, landlords, investors and developers alike.

“Industrial land values ​​continue to match and in many areas exceed residential levels.”