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Take-up levels in the Western Corridor ‘normalise’ following a dismal start to the year

Say Jones Lang LaSalle in latest Western Corridor research

London, 5th July 2012 - Latest research by Jones Lang LaSalle shows that take-up levels in the Western Corridor returned to ‘normal’ following a dismal start to the year, with close to 550,000 sq ft transacted during Q2, just above the 5-year quarterly average of 515,000 sq ft.

Take up for the first six months of the year stands at 703,000 sq ft with West London accounting for two thirds of occupier activity. The Manufacturing sector dominated take-up in the first 6 months of 2011 , accounting for 44% of floorspace transacted.  Key deals included Aker’s, represented by Jones Lang LaSalle, acquisition of Building 6 at Chiswick Park, totalling 215,000 sq ft and let during construction, which accounted for 40% of Western Corridor take-up during Q2.

Commenting on the levels of take-up predicted for H2, James Finnis, Lead director in the South East Office Agency team at Jones Lang LaSalle said: “Looking ahead, we expect similar levels of take-up across the latter half of 2012, resulting in annual take-up much in line with the 5-year annual average of 2.2 million sq ft.  Therefore we believe 2012 will be an improvement on 2011, when take-up totalled just 1.8 million sq ft.”

Total supply in the Western Corridor increased by 2.3% q-on-q and 7.9% y-on-y during Q2.  However, Vicky Heath, South East Offices research director at Jones Lang LaSalle goes on to comment:  “It is important to note that this increase was driven by the release of second hand and refurbished space on to the Thames Valley market.  The vacancy rate for the Western Corridor stands at 15.1% (up 40 basis points on q1) but the Grade A vacancy rate remains unchanged q-on-q at 5.6%.  The shortage of Grade A supply in the West London market remains an issue with the Grade A vacancy rate remaining at 2.9%. “

James Finnis continued: "The level of speculative activity is unlikely to address the diminishing supply of Grade A space with only 316, 000 sq ft due to complete in the Western Corridor this year, and 305,000 sq ft in 2012. In a market of just over 85m sq ft this replacement rate of stock is historically low. The rate which should be running at 1 to 2% of stock ie approx 1.5m sq ft is currently less than 0.75%. This is leading to a shortage of the best stock particularly in the West London market."

The level of named demand remains steady q-on-q with 2.9 million sq ft of active named requirements circulating in the Western Corridor market.  In line with take-up trends, the Manufacturing sector is the most active sector in terms of future demand, accounting for 42% of floor space required, followed by the Service sector (32%). 

The West London market continues to see prime rental growth in select locations. During Q2 Chiswick, Hammersmith and Uxbridge all recorded rental growth.  The average prime rent for West London currently stands at £31.07 – up 10% y-on-y.  Within this market Chiswick and Hammersmith have recorded significant growth over the past 24 months.  Over the period Q2 2010 – Q2 2012 rents in Chiswick have increased by 32% and currently stand at £46 per sq ft while rents in Hammersmith have increased by 14% over the same period and currently stands at £40 per sq ft.

Prime rents in the Thames Valley market remain stable at £24.64 per sq ft and we expect any growth over the remainder of the year to be concentrated in West London.   Complete the above section with your details.