Brake on rental growth


13-03-2001

Jon Hutt

Another boom year for the East Anglian office market - with more than 1.3 million sq ft of space leased - has been reported by FPD Savills. That's a 30 per cent increase on the previous year.



Yet again Cambridge was the dominant office market in activity terms. While there was a slight increase in the availability of good quality space in the city centre, Cambridge remained a city dominated by its business park and out-of-town office market. Almost 75 per cent of the space leased over the last year was out of town, with all the five largest deals coming on business or science parks.



Jon Hutt, of FPDSavills' Cambridge office said: 'It is clear that East Anglian office occupiers - home grown and inward investors - want the best quality space and are prepared to pay for it.



'A key reason for this must be the difficulties in attracting and retaining staff in a region with very low unemployment. Many companies see the location and specification of their offices as a major factor in their attractiveness to existing and potential employees.'



Demand across the region continued to be dominated by hi-tech businesses, but there was also a significant increase in demand from companies in the business services sector.



A combination of slowing economic growth and less enthusiasm in the City for biotech, telecoms and e-commerce may take some of the heat out of the East Anglian office market during 2001.



Office supply has increased by 35 per cent in the last year to 2.3 million sq ft, with a similar increase in the amount of Grade A space available at the end of the year.



One of the most dramatic changes came in Cambridge where a year ago around 50 per cent of the available space was Grade A, now more than 75 per cent is prime.



Office rents have risen across the region, apart from Peterborough where increases in the amount of space available have caused a certain amount of stagnation in the office market.



Prospects for rental growth vary across East Anglia. Further relaxation in the supply and demand imbalance will limit rental growth in Cambridge over the next 12 months; however, continuing rental growth in those towns where supply shortages remain is being forecast.



In the industrial property sector, the total take-up during 2000 was 21 per cent ahead, with manufacturing companies taking over from the previously extremely active distribution sector.



Whereas in previous years much of the focus of industrial demand was in and around the region's major towns, last year there was a significant number of deals done in other locations - primarily along the main transport arteries.



Caption: Prospects for rental growth varies, says Jon Hutt of FPDSavills