Modern, high quality business parks have secured some of the largest lettings in the South East and Greater London office market over the past year, according to Knight Frank.
Almost half, 49%, of the region’s office space leased during the period has been in its business parks outside of town centres; representing 1.7 million sq ft of take up. This is also indicative of limited Grade A options in town centre locations.
Roddy Abram, Head of South East & Greater London Offices, said: “Demand for new and refurbished offices in the region’s top business parks remains robust, evidenced by recent large lettings. Overall, the gap between Grade A and B vacancy availability is the widest in 11 years, with one-third of vacant space no longer aligned to modern occupier expectations. The business parks that prioritise placemaking and community will continue to attract large companies with campus-style requirements.”
Seven of the ten largest leasing transactions over the past 12 months have occurred in out of town locations, with BAE System’s 155,000 sq ft worth of deals at Reading’s Green Park the largest. Notable transactions this year have included ARM’s 95,709 sq ft letting at Peterhouse Technology Park in Cambridge. Nine out of the ten largest deals were for Grade A buildings, either on a pre-let basis, or in ones that have been newly constructed or refurbished.
Simon Rickards, Head of National Offices Capital Markets, said: “Sustained occupier demand and rental growth at the most reputable and amenity rich business park locations highlights a compelling opportunity for investors, given the ongoing disconnect in prime pricing between town centre and out-of-town assets. Top-tier, well-let assets in central locations remain sought after, with prime pricing stabilised in the 7.00%–7.50% yield range, reflecting their secure, long-term income profiles. However, when similarly strong assets are situated out of town, investor perception often shifts—leading to materially softer yields despite comparable occupational fundamentals. This pricing gap presents a notable opportunity for value-driven capital to access high-quality, secure assets at a relative discount.”
