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7 February 2022

OFFICE / HOME WORKING BALANCE SEES A SHIFT IN THE SOUTH EAST OFFICE MARKET

Business Space, Commercial, Offices


2021 proved to be another tough year for the office sector in many locations across the South East, according to SHW in its latest Office Focus report. However, as many firms moved towards a return to office working, demand in certain locations - and the resultant transactions – saw an increase.



Tim Hardwicke, SHW’s Partner and Head of Agency, comments: “It’s clear there is still a need for office space to encourage more staff interaction and to boost motivation and wellbeing, however most companies are now embracing some form of home working, allowing for a better work-life balance for staff and, also, reducing overall occupational costs whilst maintaining productivity. We are seeing that most companies want staff to return to the office to some degree, with between 20-60% homeworking being the norm going forward.”

 

In London in 2021, SHW reported average Grade A office rents of: £32.50 per sq ft in Kingston; £53.50 in Richmond; £55 in Putney; £57.50 in Battersea and Wimbledon; £75 in the City & Southbank and £117.50 in the West End, with 9.3 million sq ft of take up in the City and Southbank and 6.93 million sq ft in the West End. Vacancy rates are currently at 7.1% in the City and 7.8% in the West End.

 

In Bromley, though quoting rents reached £37.50 per sq ft, levels remained static at £30 per sq ft with take up doubling from 11,000 in 2020 to 22,000 in 2021. Take up has fluctuated over the past five years here, reaching 40,000 sq ft in 2018 and dropping down to zero in 2019. Vacancy rates remains low at 5.4%, but with a total 205,000 sq ft of logged demand in 2021 and a current availability of 71,621 sq ft, we may see rents moving upwards.

 

Croydon saw a slightly higher (highest) quoting rent of £38.50 in 2021, with rents again remaining static at £34 per sq ft. Take up more than doubled to 95,300 sq ft. Vacancy is at 13.06%, but with availability at 470,000 sq ft and total demand in 2021 logged at 2.3 million, we will likely see some competition for space in 2022.

 

In Epsom and leatherhead, rental levels dropped slightly from £28 per sq ft in 2020 to £27.50 in 2021, with a total take up of 66,500 sq ft. Availability is currently at 262,000, with demand at a total of 150,00 sq ft overall logged in 2021. While in Redhill & Reigate rents dropped further to £27.50 per sq ft from the previous year’s average of £31.50. Here take up almost halved to 65,500 sq ft and the total 195,000 sq ft of demand logged almost matches current availability of 190,000 sq ft.

 

Burgess Hill & Haywards Heath was another static location in terms of rental levels at £24 per sq ft, though take up was up nearly 400% to 23,500 sq ft. Total demand for 2021 was 175,00 sq ft, with a current availability of 51,000, giving potential for rental growth due to lack of stock. And in Gatwick & Crawley, again rents remained steady at £27.50 per sq ft, a slow increase from £26.50 in 2017. Take-up was also static at 57,500 sq ft. With a vacancy rate at 16.6%, availability at 630,000 now in 2022, and a total of 415,000 sq ft of logged demand across 2021, rents look unlikely to increase in 2022 however we do remain confident that 2022 will see a substantial increase in take-up.

 

Seeing a similar trend in Horsham and ‘Eastbourne, Hailsham & Polegate’, rents stayed the same at £20 per sq ft and £16 per sq ft respectively, with take up increasing and all locations suffering with extremely low options for occupiers to consider. And in Littlehampton, Bognor & Chichester, rents dropped slightly from £17 to £16 per sq ft, with the trend for zero take up from 2018 to 2020 broken with 10,000 sq ft let, albeit there have been a number of smaller transactions sub 5,000 sq ft which are not recorded in these statistics.

 

Worthing & Lancing showed zero take-up in 2021 for the second year running. With demand outstripping availability and a 2% vacancy rate, investors need to look at providing the right stock for occupiers’ requirements as the market continues to be dominated with sub 5,000 sq ft transactions.

 

Last, but certainly not least, in Brighton & Hove, in 2021 we saw an improvement on take up levels as we head back towards pre-covid levels. The headline rent for Grade A remained static although this is due to the limited supply of new build stock. 30,000 sq ft of new build stock was delivered at the end of 2021 and a further 125,000 sq ft is to be delivered later this year. We are now quoting £37.50 per sq ft on the new build stock being delivered and we expect to achieve headline rent of £35+ psf in Q1 2022.

 

Vacancy has increased to 8.8% although it is important to note that the increase in availability has not be caused by a reaction to Covid and occupiers giving up space but instead due to ongoing development in the city. Once this space is absorbed by the market, Brighton & Hove will return to a position where there is a complete lack of availability to satisfy the ongoing


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Tim Hardwicke

Agency

Partner (Head of Agency)

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