The M25 Drives Talent To Eight Key Hot Spots
Massive regeneration and infrastructure development will drive talent to the South East of England, according to Knight Frank’s “The M25 Report.”
Knight Frank identified the following hot spots for the commercial real estate investor:
Ealing, Maidenhead and Reading
The completion of the Elizabeth Line will enhance office market performance at disembarkation points, with Maidenhead and Reading in particular continuing to push office rent records. Knight Frank forecasts new highs of £42, and anticipates possible percentage increases of 11% and 17%, respectively. (As of May 2017, £38 and £36.75 have been achieved). The line will also be the catalyst for speculative new development in Ealing, with rents forecast to hit £45, up from £36.25.
Thanks to a sweeping redevelopment plan and a progressive council, exciting new projects seem to come down the pike in Croydon every other week. HMRC announced last year that it would consolidate its vast real estate holdings into 13 regional hubs, one of them in Croydon. The government tax agency took all of One Ruskin Square in the central regeneration district around East Croydon station. Boxpark, an enormous pop-up mall, recently announced it would franchise its Shoreditch location to Croydon. The excellent rail links and burgeoning entertainment scene are spurring other developments. This week, residential developer Hub got the green light for a mixed-use development of up to 35 storeys high that will include 514 new homes. The activity is pushing rents to around £34/SF.
The Watford office market is experiencing a “buoyant period of transactional activity,” according to a research paper published by Savills. Takeup for 2016 was 213K SF, nearly three times 2015’s total absorption, and the highest amount since 2000. High levels of occupier demand has continued into 2017, with 105K SF transacted by the end of the first quarter. Knight Frank attributes the activity to a diverse range of occupiers and rental growth of 13% over the last year, with further headroom for growth. Prime rents were previously forecast for £32.50 in 24 months’ time, but this could be exceeded, with £35/SF now a possibility — an 11% possible increase.
Threadneedle is developing a 60K SF speculative building at Croxley Business Park, and Boultbee Brooks Real Estate is developing Clarendon Works, a new 30K SF speculative building that Savills has pre-let to Salmon, which achieved the record rent of £31.50.
Cambridge and Oxford
The two towns are the epicentre of the knowledge economy and continue to see continued research and development investment from the pharmaceutical and motorsport industries. The area is also starting to position itself as the Silicon Valley of the U.K. AstraZeneca recently topped out its new global headquarters and research facility at Cambridge, and Amazon followed suit. A new £20M tech incubator is set to open in June, and with a rail link directly to Kings Cross, London talent could slowly drift to Cambridge. Oxford, meanwhile, has a 20% rental discount to Cambridge, with performance restrained by lack of supply of development sites in the city centre.
Tech and creative industries are drawn to Brighton’s hipster lifestyle appeal and strong academic infrastructure. Knight Frank says those features are enough for rents to exceed £30/SF.
The South East is home to more than 900,000 businesses and contributes £249B in economic output per annum, a contribution second only to Greater London. London Heathrow and London Gatwick provide the region with international connectivity, and the development of the Elizabeth line will continue to make the region a key destination for international companies looking for a foothold in the U.K. marketplace.
This increased connectivity will encourage a pool of young talent already questioning the affordability of Central London to flood to the South East markets, subsequently creating a concentration of growth in larger commercial centres.
Learn more about rising commercial centres at Bisnow's London's Hottest Areas event 23 June.