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June 11, 2008

Lack of Grade A accommodation in Thames Valley

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by Lin Freestone

Lack of Grade A accommodation in Thames Valley

There is an increasing demand for Grade A space in the Thames Valley. This is particularly the case in the town centres of Staines and Maidenhead, where there is almost no supply of Grade A accommodation.

Take-up of available space in the area rose by 15.2% in 2007, according to information supplied by Savills in a recent Client Connect briefing.

Rents have begun to rise by an average of 3% per annum since the end of 2007, even though there has been a significant fall in capital values.

Because of the diminishing supply of suitable accommodation, in the first six months of 2008 the average rent-free period fell to under one month per year of the lease. In 2007 the average rent-free period was 1.4 months per year.

Speculative developments in the South East have been put on hold as a result of the tightening of credit, and this has contributed to the fall in the amount of new commercial accommodation becoming available.

According to Knight Frank, given the lack of supply of new and Grade A stock, the best buildings in prime centres will see rental growth.

The property consultant pinpoints Hammersmith and Reading, and predicts that by the end of the year these areas will see an increase in prime rents in excess of 10%.

In the M25 office investment market, Knight Frank forecasts that prime yields will remain unchanged by the end of the year at 6.25%; secondary yields are predicted to move out towards 9%.

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