OFFICE / HOME WORKING BALANCE SEES A SHIFT IN THE SOUTH EAST OFFICE MARKET
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.
Martin Clark, Partner at SHW, 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 Horsham and ‘Eastbourne, Hailsham & Polegate’, rents remained static at £20 per sq ft and £16 per sq ft respectively in 2021, 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 demand for Grade A space. Especially with the total logged demand for 2021 being circa 530,000 sq ft.
Martin concludes: ““The future of the office is far from dead as Zoom and Teams are no substitute for physical social interaction, but with companies requiring less office space per head employed, firms are looking at ‘flight to quality’ in order to provide the best accommodation affordable for their staff. As a result, we are optimistic that there will be a healthy level of take up during 2022 as companies look to reduce space occupied and upgrade their office space.
“Despite the increase in working from home, long-sighted investors seeing the advantage of office occupation and the versatility of the buildings re still keen to acquire assets in this sector.”