Tuesday, 31 March 2015



The South East office market suffered a “blip rather than a trend” in 2014 as take-up and in particular large deals remained stubbornly modest key players believe, while a significant majority expect recovery this year. This was one of many themes that emerged at this year’s RO Real Estate and Office Agents Society lunch. CoStar News was invited to join an insightful and entertaining debate.
The debate, an annual lunch meeting that discusses key issues affecting the UK office market, focused specifically on South East offices.

The participants were: Richard Bourne, RO Real Estate, Ryan Dean, Office Agents Society chairman and Knight Frank, Jamie Renison, DTZ, Joel Hawkins, Bell Hammer, Chris Williams, CBRE, Rob Bray, Bray Fox Smith, James Silver, Landid, Paul Norman, CoStar, Edward Smith, Strutt & Parker, Giles Easter, Aberdeen Asset Management, James Thornton, Mayfair Capital, Nick Coote, LSH, Nick Moore, Lloyds Banking Group

As a scene setter the debate kicked off with the findings of a poll taken of the OAS’s 800 plus members to test the temperature in terms of expectations for the occupier and investment markets across this key office region. Unsurprisingly, a mixture of hope and certainty has driven confidence that the low base for take up in 2014 will be improved upon while there is uncertainty as to whether a stellar year for the capital markets can be improved on. The results were:

Do you think office take up in 2015 will be?:
a) more than 2014 – 77%
b) less than 2014 – 10%
c) similar – 13%

Investment volumes in 2015 will be:
a) more than 2014 – 47%
b) less than 2014 – 16%
c) similar – 37%

Richard Bourne of RO began proceedings by saying that both the occupier and development markets had moved on in significant ways since last year’s event and therefore it was great to have individuals from the development, investment and banking world to discuss how the changing dynamics was impacting activity.

Ryan Dean, of Knight Frank and the OAS, chaired proceedings and began by asking:

“Was the lack of big deals in 2014 a blip or a more worrying trend?

Chris Williams: “It is a blip rather than a trend. It was obvious that regionally bigger deals were being done and this was disappointing but we are all aware that there are larger deals waiting to happen for the likes of Amadeus and TK Maxx and we know from our clients that the bigger strategic requirements are not dead.”

Giles Easter: “I think there is a concern that larger occupiers may be have made the jump back into central London and in some cases this change could be better reflected in the South East. Ultimately developing a building starts with the people and ends up with the people.”

Nick Coote: “The key trend is everything is about urbanisation. There will be a rebalance in favour of the Thames Valley thanks to rail infrastructure improvements that are truly significant. And in 2017 when London is rerated it will even out the value of places in the South East and back offices will move out and [the lack of big deals] will be seen as a blip.”

Chris Williams: “The reality is however that businesses can cut people costs more substantially by moving to Glasgow or Cardiff and further afield so this is not a certain factor.”

Nick Moore: “The key in deciding where to locate will always be what is the right solution for my business and the Thames Valley needs to provide this.”

Ed Smith: Ultimately there does come a tipping point in terms of cost and this will happen in favour of the Thames Valley. In Hammersmith rents have soared and whereas some occupiers have been prepared to suffer a rental rise from £35 to £50 per sq ft there are others that will look further afield and we of course are aware that tenants such as Monsoon, Boden and Net A Porter are all considering moving further afield.”

Giles Easter: “It is true that many occupiers are location agnostic and will go where the building is.”

Jamie Rension: “We can see this in Central London where occupiers are looking across all of London to access staff and talent. However they are very often crippled by central London car restrictions.”

Nick Moore: “There is very little supply for large-scale occupiers and that is one of the main reasons for the current blip in large scale deals.”

Joel Hawkins: “You have to know your occupier. Some companies employ young people who want to be closer to London while others employ lots of older people and so will look further out. The point is we have to deliver different buildings in the South East and we have to be able to speculatively build almost in such a way as not to alienate anyone.”

James Silver: “What has been crucial to us [at Landid] is trying to make sure our space offers something different, something akin to the warehouse style developments coming forward in Shoreditch and fringe London locations. Interestingly at Reading and our One The ValpyThe Vaupry development where we thought we would be appealing specifically to younger companies our first tenant which signed up - Maybe - was headed by a 70-year-old engineer boss who loved the space.”

Ryan Dean: “So what do occupiers want in the South East?

Chris Williams: “There are greater expectations in terms of amenities. Schemes that build in restaurants and retail are succeeding.”

James Thornton: “We are very focused on town centres and the diversity of experience this offers.”

Richard Bourne: “Town centre amenities are crucial for the younger employees.”

Jamie Renison: “Great connectivity is important. The Thames Valley is completely behind the curve at present in terms of public transport and this needs to be addressed.”

Nick Coote: “Good car parking ratios remain crucial to our market. Pepsi recently moved to Green Park, but it also seriously considered a Boultbee town centre scheme in Reading but ultimately decided against this because of the car parking space in comparison.”

Joel Hawkins: “This very much depends. In Uxbridge where we have a scheme tenant car parking is not an issue.”

Rob Bray: “One thing that seems to be overplayed is the lack of appetite for out of town locations. There are still great deals being completed out of town.”

Ed Smith: “The figures do bear this out. According to Strutt & Parker and our figures, 10 years ago 41% of deals completed in town and 59% were out of town. That has now narrowed to 44% in town and 56% out of town. There has really been little change.”

Joel Hawkins: “We think that nine out of 10 times money will go to town centre locations.”

Nick Coote: “That is true. The UK institutions are all buying in-town and selling out of town.”

Ed Smith: “The business parks that will survive will be the big ones.”

Richard Bourne: “Business parks are not necessarily dead. Aztec West is nearly full again with occupiers looking for space with low supply.”

Nick Coote: “It will be all about big floorplates and amenities and transport.”

Giles Easter: “Success will be all about three things - critical mass and scale, single ownership and the amenity.”

Nick Moore: “The focus has to be on asset quality. But at Lloyds we prefer town centres because the threat to the high street means there is more opportunity and with town centres there is a better track record often.”

Ryan Dean: Is it an occupier or a landlord market now?

Chris Williams: “The central London occupier will start five years in advance looking at its options for moving while we are lucky in the Thames Valley if they start two years in advance. Occupiers have been used to oversupply but that is changing and the balance of power is switching.”

Nick Coote: “Once occupiers go over the gain line now and by that I mean the point at which they have run out of time to find a new office while negotiating the terms they want they have a problem in this market. They simply will not find the value or solution they want.”

Nick Moore: “I wish occupiers understood the value of their own covenants. We could fund prelets quite happily if they did.”
Ryan Dean: “There is now a premium being paid by occupiers to take big space.”
Giles Easter: “It is fairly balanced between landlord and tenant at present.”
James Silver: “We have a preference for multilet schemes and that is a common theme. Investors want to derisk by having a number of rather than one tenant. In the past we would have held out for an 80,000 sq ft to 90,000 sq ft letting at our Urban Building in Slough for instance but that has flipped around and we would more likely do a small letting first.”

Ryan Dean: What will happen to rents?

James Thornton: “As ever it is all about supply and demand and there must be rental growth this year.”
Nick Coote: “A key problem is there is nothing of quality in the £18-£19 sq ft arena which is holding back the market.”

Ryan Dean: The question is do you have to be brave enough now as the landlord to ask for the rent at £34 rather than the current £24 per sq ft because you believe that is what the building is worth?”

Richard Bourne: “Tenants are paying more for good quality space in under supplied markets like Weybridge.”

Joel Hawkins: London is not the Thames Valley. It would be a big test to see whether the Thames Valley can significantly lift quoting rents from where they are.”

Ryan Dean - Are we in a good place for 2015?

Chris Williams: “2007 was a fantastic year and then of course everything changed. The fundamentals are in place for a strong year again.”

James Thornton: “There is plenty to be optimistic about in the Thames Valley now, particularly with significant infrastructure improvements in the pipeline at the airports and elsewhere.”

Giles Easter: “The reality is those coming to invest in the South East now will have arrived too late in many cases. There was so much fat in the deal before that you could afford to keep your powder dry but with construction costs having lifted it is far more difficult now. If you have done your deal you are sitting pretty however.”

Joel Hawkins: “This has been the slowest and most considered period of development in the South East of any cycle and that has to stand the market in good stead.”

Nick Moore: “We will look to lend. We are looking for track record in our customers and a measured risk profile, particularly focusing on balanced multilet property in town.”

Richard Bourne: “Strip out the 100,000-plus sq ft deals, and the occupier market looks very strong.”

All of the attendees were asked finally to vote for the location they felt is set for the strongest performance over the next period.

The most popular was Maidenhead followed by Croydon, Slough, Reading and finally Hammersmith, Cambridge, Weybridge and Oxford.


- Ends -

For further information:
Edward Rowlandson / Nick Moore, RO Real Estate 
01707 601400 / 0207 025 1780

Faye Walters, Tavistock Communications
020 7920 3150

Monday, 2 March 2015



RO Real Estate, the UK commercial property investment and development company, has completed the sale of three office assets located in the South East of England for a combined price of £7.825 million.

RO has sold One and Two Manor Park in Reading to Ultima Business Solutions, one of the UK’s leading providers of IT infrastructure solutions, for £7 million.

The properties comprise a total of 68,000 sq ft of space, located just off Basingstoke Road and one mile from junction 11 of the M4. RO completed a number of asset management initiatives at the office scheme including a major refurbishment of One Manor Park, leading to lettings to ALK Abello and Computer Task Group.

Lambert Smith Hampton and Knight Frank advised RO and Sharps Commercial advised Ultima Business Solutions on this transaction.

RO has also sold Fortune House in Egham, Surrey, to Spinnaker for £825,000. The property comprises a 4,754 sq ft self-contained two storey office building. New Ballerino and Vail Williams advised RO and the purchaser was unrepresented.

These disposals are part of RO’s ongoing strategy to reposition its portfolio by carrying out a rolling disposal programme and recycling the proceeds for reinvestment in core income and value-add opportunities in the South East. RO Real Estate still has a significant amount of cash to reinvest in lot sizes between £2-5 million.

Richard Bourne, head of RO Real Estate, said: “We will use the cash resources from these disposals to reinvest in a mix of assets which will deliver either high-quality secure income or asset management, development and refurbishment opportunities. We continue to strive towards delivering a high-quality portfolio with large capital growth potential and a secure income base.”

- Ends -

For further information:
Edward Rowlandson / Nick Moore, RO Real Estate 
01707 601400 / 0207 025 1780

Faye Walters, Tavistock Communications
020 7920 3150

Notes to Editors:
RO Real Estate is a privately-owned company specialising in commercial property investment and development in the south east. It is the property division of the RO Group, which has majority interests in businesses involved in residential development, high-quality holiday lodge developments, domiciliary and specialist care services and the development of utility-scale solar energy projects.