Confidence returning to South East commercial property markets, finds Vail Williams

Office market confidence is returning across the Thames Valley, Oxford and Surrey – but a lack of new industrial supply remains a core issue for the commercial market.

These are the latest findings from property consultancy Vail Williams, which has published a comprehensive report on the region’s commercial property landscape.

David Barden, regional managing partner for the Thames Valley, said: “A new government has brought with it a fresh perspective, and we’re already seeing the positive impact of this on the office and industrial markets.

“Stabilised interest rates have invigorated the property market.

“Offices have regained their importance as hybrid work solidifies, and the creative repurposing of secondary office buildings are bridging the gap in industrial land and residential demand.”

In the office market, occupiers committing to a hybrid future have boosted the level of office transactions.

Office supply across the Thames Valley and Surrey remains static, with a lack of new developments but stable take-up as new occupiers make up for those looking to downsize.

There remains a very limited supply of grade A stock across the board, particularly in Surrey – despite that being what occupiers are demanding.

In Reading and Maidenhead, super prime supply makes up a large portion of the take-up figures across the Thames Valley, while there remains a good level of grade A and B stock.

Reading has the largest overall supply, which is holding back rental growth, with stock in the town largely dominated by grade B.

Headline rents for super prime stock remain high across the board, but the office rental market is generally underpriced, and rents have reduced in real terms.

However, rents remain high in Oxford, with Woking and Guildford showing competitive (if rising) rates.

In the industrial market, there remains a lot of optimism across the Thames Valley, Oxford and Surrey, despite the fact that the logistics and ecommerce markets are now at the consolidation stage.

New industrial developments in Didcot, Slough, Uxbridge and Thatcham are leading market rental growth, but in general, there remain good prospects for further rental growth across the Thames Valley when compared to other locations.

The sectors driving rental increases through occupier demand include life sciences and tech/data centres.

But the development pipeline across the Thames Valley and Surrey continues to be challenging due to construction costs, interest rates, inflationary pressures and a narrowing gap between what vendors want to try and achieve and what occupiers want to pay.

David added: “A lack of industrial supply remains a core issue across the Thames Valley and Surrey regions, but deals are still being done here and we are welcoming some quality schemes to market with open arms.

“The overall theme in industrial terms is ‘build it and they will come’.

“Landlords and investors are identifying the right microclimate in which to invest to deliver the right product to meet tenant requirements while also delivering a good return on investment.

“And developers are starting to see improvements in viability for their schemes.

“Overall, this is a moment to harness change, turn potential hurdles into stepping stones and shape a more dynamic and resilient future.”