ATIS REAL Weatheralls - General - Office Rents Research

Date: 04 Dec 2002

Headline rents in the Thames Valley office market fell by an average of 6% over the year to date according to the latest research from commercial property consultants ATIS REAL Weatheralls.

The company’s new South East Office report also reveals that once occupier incentive packages have been taken into account, rents have actually fallen by up to three times the headline figures in real terms. The report highlights continued pressure on rental levels with vacancy rates across the region up by 1.7% in the last six months to 13% and supply levels up by 36% against the same period in 2001.

Furthermore, the glut of supply in the South East is set to increase further with
800,000 sq ft (74,322 m2) of new office space under construction and due for completion before the end of the year.

Mark England, head of South East office agency at ATIS REAL Weatheralls says: “Occupiers in the South East can expect to enjoy reductions in occupational costs as continuing falls in prime rental levels, caused by weakened demand and oversupply, impact on costs.

“We are seeing increasingly generous incentives packages as landlords seek to entice potential tenants; a standard rent free period on a 10/15 year lease is now around 12 months.”

Despite falling rents, take-up across the whole South East region has risen by 64% in the last two quarters compared to the previous two and is 5% up on the same period for 2001. The South West sector of the M25 has performed well, particularly Basingstoke and Croydon, with the former recording the best take-up figures for three years. However, supply continues to outstrip demand.

ATIS REAL Weatheralls’ report reveals that in the investment market, prime yields are hardening across the South East region at an average of 7%.

Tim Bowring of ATIS REAL Weatheralls investment agency says: “While values in the occupier market continue to suffer from falling demand and increasing supply, the investment market is not following suite. Values are continuing to rise due to the intense competition from private buyers seeking safer havens in the face of poor performing equities and this is encouraged further by the continuing low level of interest rates which remain at 4%.”

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