M25 Offices Q4 2020 Investment, Development, Investment, Development & Occupational Markets & Occupational Markets - Knight Frank
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
Investment, Development,
Investment, Development
& Occupational Markets
& Occupational Markets
M25
M25 Offices
Offices
knightfrank.com/research
knightfrank.co.uk/research
Q2
Q42021
2020
M25 OFFICES, Q2 2021
EXECUTIVE SUMMARY
Positive deal rate despite Technology and Science any quarterly period for three years. As
continued headwinds leading recovery in 2021 a result, investment volumes for H1 2021
reached to £1.97bn. This total is 53% ahead
Leasing volumes in the South East Despite the global pandemic, the first
of the equivalent period in 2020 and is
reached 586,560 sq ft in Q2, 27% below six months of the year have seen a
the highest for an H1 period for 16 years.
the 10-year quarterly average. Even continuation, and in some examples
so, this meant that take-up at the the acceleration of trends that have been International buyers most
mid-point of the year increased to observed over recent years. Occupiers active in 2021
1.37m sq ft, the highest total for a H1 stemming from the Telecoms, Media
An interesting statistic of H1 2021 was
period since 2018. Significantly and and Technolog y sector have been
that seven transactions completed with
further reinforcement of the future particularly active and account for 30%
a sale price in excess of £50m. This is
role of the office, six deals of over of take-up across the South East in 2021.
the highest total above this threshold
50,000 sq ft concluded in the first Interestingly, this business sector also
during an H1 period since 2017. The seven
half of the year. This is the highest dominates active demand schedules
deals that were agreed account for 59%
total for deals of this scale during an accounting for 30% or 1.3m sq ft.
of total investment volumes during H1.
H1 period since 2016.
The Covid-19 pandemic has also served Furthermore, behind six of the seven
Pockets of new activity to accelerate both investor and occupier deals was international money, which
in 2021 demand for life sciences real estate. accounts for 75% of all volumes during
The sector is seeing investment rising H1. Significantly, confidence has been
The markets across the South East
rapidly as the criticality of its work gains growing amongst US funds, with 55%
are recovering at different rates. The
1 2 3
recognition. Across the South East, firms of capital spent on South East offices
M4 is the principal market of focus
under this umbrella account for 18% of derived from US investors.
in 2021. During the second quarter,
take-up over the past 18 months. Oxford
367,300 sq ft of take-up was recorded. Centres of innovation
and Cambridge have been the epicentres
Although this was 9% below the 10- attracting buyers
Take-up for H1 2021 was Take-up in the M4 during The TMT sector of activity, with heightened demand
year quarterly average, this meant
supporting a sharp rise in market rents. The main Life Science centres have been
the highest total for an H1 2021 has already accounted for 30% of that take-up for the first half of the
In Cambridge rents have increased by a principal target for investors during
year increased to 824,800 sq ft, a
H1 period since 2018. exceeded the full year take-up in H1 2021. 9% over the past year, whilst rents in the first half of the year. Cambridge
total higher than the full year results
Oxford have risen by a third. and Oxford are proving particularly
total of 2020. of 2020.
attractive, with 16% of investment deals
With a greater onus on technological
Market recovery in the M25 and the across the South East completed in these
resilience and scientific research, high
M3 is proving slower, albeit firmly two cities over the past 18 months. As
demand for infrastructure, conducive
underway. In the M25, take-up is well as the resilience to the pandemic,
to these disciplines will be legacy of
below the long term average, but 50 the sector also has strong future growth
the pandemic.
4 5
deals have completed in the first six characteristics making it attractive from
months of 2021. This compares to a long term investment perspective. In
Investor push in the
just 28 in H1 2020. Similarly, the H1 2021 equity investment into high-
second quarter
M3 has recorded 24 transactions so grow th life sciences companies has
Investment volumes for Overseas capital far in 2021. This compares to just Tota l investment into Sout h Ea st already exceeded the whole of 2020,
18 at the same juncture in 2020. offices during Q2 reached £1.49bn, at over £2bn. Funding is translating
H1 2021 were £1.97bn, accounted for 75% of
Importantly, both have registered the highest total since Q4 2013 and into strong expansion activity and
the highest total for an investment volumes transactions exceeding 50,000 sq ft, the second highest since 2005. During therefore onward growth from a real
thus demonstrating the rekindling of t he qua r ter, 29 tra nsactions were estate perspective.
H1 period in 16 years. in H1 2021.
longer term commitments. completed, the highest amount in
2 K N I G H T F R A N K .C O M / R E S E A R C H
3
M25 OFFICES, Q2 2021 M25 OFFICES, Q2 2021
OCCUPIER MARKET M25 take-up
Sq ft
500k
400k Emma Goodford
300k
0.5m Market results have been underpinned
Although a dip was registered in Q2, leasing volumes in 2021 are the 200k
sq ft under offer by larger strategic transactions in H1.
With the focus on best quality/ new
highest for three years. Technology focussed occupiers are most active, 100k space, choice is limited, resulting in
with the M4 corridor the principal destination. 0k
several large commitments being
0 evidenced. TMT and Life Science sectors
Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021
have dominated hence the focus on the
Source: Knight Frank Research
M4, Oxford and Cambridge markets.
This trend is set to continue in H2 as we
emerge from the pandemic.
Windsor One, 57,400 sq ft let to Intercontinental Hotels.
M25 supply
Sq ft
SOUTH EAST
8m
Q2 TAKE-UP 7m
6m
8%
587k sq ft 5m
4m below the
10-year average in
Roddy Abram
3m
Q2 2021 Continued activity in the M4 markets
2m
-25%
has seen record rents of £43.00 per sq ft
1m
achieved in Windsor. This firmly backs
0m
Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 up the occupier trend for new best in
class office accommodation achieving
Source: Knight Frank Research
new headline market rents. We see this
continuing in other markets across key
centres in the South East.
Take-up and supply Key leasing transactions
Q2 2021 Q2 2021
TAKE-UP TAKE-UP SUPPLY SUPPLY VACANCY
ADDRESS SIZE SQ FT OCCUPIER RENT £ PER SQ FT
(SQ FT) (VS Q1 2021) (SQ FT) (VS Q1 2021) RATE
-6% 6.1% BBC Broadcast Centre, White city 120,000 ITV Conf
M25 275,286 -11% 7.4m New and Grade A New and Grade A
space: 77% space: 4.8%
Windsor One, Windsor 57,387 Intercontinental Hotels £43.00
-18% 5.8%
M3 142,328 -35% 2.3m New and Grade A New and Grade A
400 Longwater, Green Park, Reading 46,306 Amazon £36.00
space: 78% space: 4.5%
Pinehurst Two, Farnborough Business Park 29,831 Siemens £28.50
-4% 9.0%
M4 367,296 -20% 6.0m New and Grade A New and Grade A
space: 85% space: 7.7% Valiant House, Uxbridge 26,269 DWP £26.50
Source: Knight Frank Research Source: Knight Frank Research
4 5
M25 OFFICES, Q2 2021 M25 OFFICES, Q2 2021
PRIME RENTS
ACTIVE DEMAND: 4.3M SQ FT £ PER SQ FT
Named demand in the South East
KEY
Cambridge
Active named demand by sector
49.50
Q2 2021 Q2 2021 Growth 45.50 9%
30% TMT Q2 2020 (pa)
24% Financial & Business Services
M1
A1 (M)
18% Pharmaceutical/Healthcare/Medical Technology
Watford
St Albans
37.00
8% Construction & Engineering 38.50
35.00 6%
37.50 3%
7% Retail, Distribution & Transport
Oxford 22 M11
21
20
6% Manufacturing & FMCG's
48.00 23 24 Brentwood
19 25 26
46.00 4% 27
4% Energy & Utilities
29.00
3% Public Sector M40 18 29.00 0%
0% Other Maidenhead M25
Slough 17 Hammersmith
37.50 Uxbridge
Source: Knight Frank Research
38.50 -3% 35.00 31.50 57.50 28
37.00 -5% 34.00 -7% 58.00 -1%
29
16
Reading
D E V E LO P M E N T: 0. 7 M S Q F T
38.50
37.50 3% 30
Space under construction in the South East 15
Chiswick 31
*This includes pre-let (0.3m sq ft) and speculative space (0.4m sq ft) 14
M4 Staines 13
52.50 1
55.00 -5% 2
34.50
Speculative development 35.00 1%
Sq ft due to complete before Q2 2022 Bracknell Dartford
12 Heathrow/
30.00 3
Stockley Park 23.00
29.00 3% 11 25.00 -8%
M3 36.50
37.50 -3% 4
10
9
5 M20
Basingstoke 8
M25 6
7
27.00 Guildford
0.3m sq ft 25.00 8% Croydon
36.50
M3
36.00 1% 37.50
0.1m sq ft
37.50 0%
M23 West Malling
M4
Crawley/
0.1m sq ft Gatwick 25.00
26.00 -4%
27.50
Headline rent assumes a new building let on a 10-year lease. 28.00 -2%
Source: Knight Frank Research Headline rent assumes a transaction over 10,000 sq ft new office space.
Rents are stated per sq ft per annum NIA.
Source: Knight Frank Research
6 7
M25 OFFICES, Q2 2021 M25 OFFICES, Q2 2021
Investment volumes
Stock Transacted (£m), LHS No. of deals, RHS
1,600 80
1,400 70
1,200 60
1,000 50
800 40
600 30
Simon Rickards
Ealing Cross bought by Oval Real Estate
400 20
200 10 Investment activity has been
0 0 particularly strong in the first half
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 of 2021, with the exposure to growth
industries such as life sciences
Source: Knight Frank Research and tech proving especially attractive
to investors.
Prime net initial yield and finance
Prime net yield (%), LHS Five-year SWAP (%), RHS
7 3.0
2.5
INVESTMENT MARKET 6 2.0
1.5
5 1.0
Tim Smither
0.5 We are already seeing keen yields for
assets underpinned by high growth
Trading activity again registered an increase in Q2, with investment 4 0.0 sectors, but as investors engage in
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 greater number, competitive pressure
volumes the highest for eight years. International buyers continue to Source: Knight Frank Research could lead to a continued hardening of
dominate, accounting for 78% of investment during the quarter. yields at the prime end of the market.
Key transactions
Q2 2021
ADDRESS PRICE (£M) NET INITIAL YIELD VENDOR PURCHASER
208% McLaren Technology Centre, Woking £170.00 6.6% McLaren Group Global Net Lease
Henley Investment/
Bedfont Lakes, Heathrow £101.00 8.07%* M&G Real Estate
Colmore Capital
Ealing Cross, Ealing £70.23 6.0% Aviva Global Investors Oval Real Estate
£1.485bn £51.3m 5.25% 22% 101 Cambridge Science Park, Cambridge £50.20 4.5% LaSalle Investment Management Morgan Stanley
310 Cambridge Science Park, Cambridge £45.00 3.2% CCLA Investment Management Oxford Properties
South East Average Prime net Buyers from
transaction volumes* lot size initial yield the UK Source: Knight Frank Research *On Let Space
* Percentage change reflects a comparison to Q1 2021
8 9M25 OFFICES, Q2 2021 M25 OFFICES, Q2 2021
N AT I O N A L O F F I C E S
R E C E N T MA R K E T- L E A D I N G
R E S E A R C H P U B L I C AT I O N S
Emma Will Roddy
Goodford Foster Abram
Partner Partner Partner
Head of National Offices National Offices National Offices
+44 20 7861 1144 +44 20 7861 1293 +44 20 7861 1280
+44 7831 581 258 +44 7789 878 007 +44 7899 001 028
emma.goodford@knightfrank.com will.foster@knightfrank.com roddy.abram@knightfrank.com
M25 KEY MARKETS, 2020
The M25 & South East
Office Market Report
Ashley Andrew Jack
knightfrank.com/M25-offices
M25 The Next Chapter
knightfrank.co.uk/research
Drewett Wood Riley
Key Markets
2021
2020
Partner Partner Partner
National Offices, Lease Advisory National Offices, Tenant Representation National Offices
+44 20 7861 1156 +44 20 7861 0662 +44 20 7861 5375
+44 7799 478 834 +44 7800 500 752 +44 7867 002 484
ashley.drewett@knightfrank.com andrew.wood@knightfrank.com jack.riley@knightfrank.com
Knight Frank Research provides strategic advice, consultancy services and forecasting to a wide range of clients worldwide including developers, investors, funding organisations,
corporate institutions and the public sector. All our clients recognise the need for expert independent advice customised to their specific needs. Important Notice: © Knight Frank LLP 2021
This report is published for general information only and not to be relied upon in any way. Although high standards have been used in the preparation of the information, analysis, views and
HIGHLIGHTS
projections presented in this report, no responsibility or liability whatsoever can be accepted by Knight Frank LLP for any loss or damage resultant from any use of, reliance on or reference to the
contents of this document. As a general report, this material does not necessarily represent the view of Knight Frank LLP in relation to particular properties or projects. Reproduction of this report in
whole or in part is not allowed without prior written approval of Knight Frank LLP to the form and content within which it appears. Knight Frank LLP is a limited liability partnership registered in England
with registered number OC305934. Our registered office is 55 Baker Street, London, W1U 8AN, where you may look at a list of members’ names. RESILIENCE, REINVENTION AND RESPONSIBILITY
1
M25 Key Markets M25 - The Next Chapter The London Report 2021
C A P I TA L M A R K E T S
Simon Tim Richard
The evolution
of space-as-a-service
1ST EDITION
Rickards Smither Claxton Power in
)
Partnership
)
Partner Partner Partner CLASH OF
THE TITANS
Head of National Offices Investment Capital Markets Head of UK Capital Markets
Next wave technology
and the productive
workplace
MAKING THE
+44 20 7861 1158 +44 20 7861 1277 +44 20 7861 1221 RIGHT IMPACT
Lessons from
Bloomberg’s new
European HQ
+44 7787 844 384 +44 7876 145 909 +44 7774 826 558 SPACE
SUPPORTING
STRATEGY
simon.rickards@knightfrank.com tim.smither@knightfrank.com richard.claxton@knightfrank.com Findings from
Knight Frank’s Global
Occupier Survey
knightfrank.com/research
RESEARCH
1
Active Capital Power in Partnership (Y)OUR SPACE
William Darren
Matthews Mansfield
Partner Partner
Head of Commercial Research Commercial Research
+44 20 3909 6842 +44 20 7861 1246
+44 7973 621 692 +44 7469 667 194
william.matthews@knightfrank.com darren.mansfield@knightfrank.com
10 11TECHNICAL NOTE
• Knight
Frank defines the M4 market as extending from Hammersmith, west to Newbury,
incorporating Uxbridge and High Wycombe to the north and Staines and Bracknell to the south.
Reading is also included.
• The
M3 market incorporates the main South West London boroughs and encompasses
Leatherhead, Guildford and Basingstoke extending north to the M4 boundary described above.
Farnborough and Camberley are also included.
• T
he
figures in this report relate to the availability of built, up-and-ready office/B1
accommodation within the M25 market. Vacant premises and leased space which is being
actively marketed are included.
• All
floorspace figures are given on a net internal area basis (as defined by the RICS).
•A
minimum 10,000 sq ft (net) cut-off has been employed throughout. Major and minor
refurbishment have been treated as new and second-hand respectively. Data is presented on
a centre and quadrant basis. Classification by centre relates to the locational details contained
within the marketing material for available properties. Classification in this manner is clearly
somewhat arbitrary.
• V
acancyrate data is based on a total M25 stock measure of 121m sq ft (net), an M4 market
stock of 66m sq ft (net) and an M3 market stock of 39m sq ft (net). Please note that a revision
to total market office stock figures was applied in Q1 2017 to reflect ‘change of use’ permitted
through the Town and Country Planning Order 2015.
• Second-hand
floorspace has been sub-divided into A and B grade accommodation, reflecting
high and low quality respectively. Whilst subjective, this categorisation is based on an
assessment of each property’s age, specification, location and overall attractiveness.
• The
South East is defined as the market area shown in the map on pages 6 & 7.
• P
re-let
= The letting of proposed schemes not yet under construction and those let during
the construction process.
• All
data presented is correct as at 30th June 2021.
Knight Frank Commercial Research provides strategic advice, consultancy services and forecasting to a wide range of
clients worldwide including developers, investors, funding organisations, corporate institutions and the public sector.
All our clients recognise the need for expert independent advice customised to their specific needs. Important Notice:
This general document is provided strictly on the basis that you cannot rely on its contents and Knight Frank LLP (and our
affiliates, members and employees) will have no responsibility or liability whatsoever in relation to the accuracy, reliability,
currency, completeness or otherwise of its contents or as to any assumption made or as to any errors or for any loss or
damage resulting from any use of or reference to the contents. You must take specific independent advice in each case.
It is for general outline interest only and will contain selective information. It does not purport to be definitive or complete.
Its contents will not necessarily be within the knowledge or represent the opinion of Knight Frank LLP. Knight Frank LLP is a
property consultant regulated by the Royal Institution of Chartered Surveyors and only provides services relating to real estate,
not financial services. It was prepared during the period of June 2020. It uses certain data available then, and reflects views of
market sentiment at that time. Details or anticipated details may be provisional or have been estimated or otherwise provided
by others without verification and may not be up to date when you read them. Computer-generated and other sample images
or plans may only be broadly indicative and their subject matter may change. Images and photographs may show only certain
parts of any property as they appeared at the time they were taken or as they were projected. Any forecasts or projections of
future performance are inherently uncertain and liable to different outcomes or changes caused by circumstances whether of
a political, economic, social or property market nature. Prices indicated in any currencies are usually based on a local figure
provided to us and/or on a rate of exchange quoted on a selected date and may be rounded up or down. Any price indicated
cannot be relied upon because the source or any relevant rate of exchange may not be accurate or up to date. VAT and other
taxes may be payable in addition to any price in respect of any property according to the law applicable. © Knight Frank LLP
2021. All rights reserved. No part of this presentation may be copied, disclosed or transmitted in any form or by any means,
Knight Frank Research electronic or otherwise, without prior written permission from Knight Frank LLP for the specific form and content within which it
appears. Each of the provisions set out in this notice shall only apply to the extent that any applicable laws permit. Knight Frank
Reports are available at LLP is a limited liability partnership registered in England with registered number OC305934 and trades as Knight Frank. Our
registered office is 55 Baker Street, London W1U 8AN, where you may look at a list of members’ names. Any person described
knightfrank.co.uk/research as a partner is a member, consultant or employee of Knight Frank LLP, not a partner in a partnership.You can also read
