GLENNY DATABOOK · east london i essex i north london & hertfordshire i south east london & kent...

EAST LONDON I ESSEX I NORTH LONDON & HERTFORDSHIRE I SOUTH EAST LONDON & KENTWELL PLACED PROPERTY ADVISORS

GLENNY DATABOOKQ3 2016

SEE THE WOOD. AND THE TREES.

EAST LONDON I ESSEX I NORTH LONDON & HERTFORDSHIRE I SOUTH EAST LONDON & KENTWELL PLACED PROPERTY ADVISORS


SEE THE WOOD. AND THE TREES.

HERTFORDSHIRE

NORTH LONDON

EAST LONDON

SOUTH EAST

LONDON

ESSEX

KENT

8-9

6-7

4-5

10-11

INTRODUCTION

Glenny LLP is the leading property consultancy and chartered surveying practice specialising in the region accessed by the North East and South East sections of the M25 motorway which we service through a network of strategically located of� ces in Essex (Basildon), East London (Stratford), North London and Hertfordshire (En� eld) and South East London and Kent (Bexley).

The statistics in this report relate to Glenny’s analysis of the property market as at the 30th September 2016, based on property data obtained through our respective of� ces servicing the area delineated on the map.

MARKET COMMENTARY

The vote to leave the EU was expected to trigger a decline in the economy and, in turn, a decline in demand for industrial and of� ce � oor space. The reality of the situation is that the economy has remained stronger than expected; the industrial and of� ce markets in our region have seen occupational demand strengthen resulting in rents for both prime and secondary property continuing to edge higher.

Take up in these markets has undoubtedly suffered but our analysis suggests that this was more a consequence of a shortage of supply, particularly for new and “Grade A” space, rather than a lack of interest on the part of the occupier.

Almost two thirds of the locations in the Glenny region have experienced double digital annualised rental growth over the past three years and this trend seems set to continue.

This rental growth story has become very compelling for investors with more than £1.1 billion of industrial assets being purchased in our marketplace over the past two years.

The over-riding message, therefore, is that despite some economic uncertainty the commercial property sector across the Glenny region remains ‘open for business’.

John BellHead of Business Space Agency and Investment

GLOSSARY

Market Availability – Relates to the amount of built stock on the market at the period end. The availability � gure does not include pre-let opportunities or new developments where construction is still ongoing.

Prime Investment Yield – The yield paid for an investment property let to an institutionally acceptable covenant for a lease term of 10-15 years at the current market rent.

Prime Rent – The rent achievable for the letting of a newly built property; typically for an industrial unit this would apply to a 20,000-25,000 sq ft building and for an of� ce letting, circa 5,000-10,000 sq ft.

Secondary Rent – The rent typically achievable on good quality second hand space in a particular location.

Prime Capital Values – The best freehold capital value achievable on the sale of a circa 10,000 sq ft industrial unit, or a circa 5,000 sq ft of� ce building to an owner occupier.

WELL PLACED FOR UNRIVALLEDREGIONALKNOWLEDGE

EAST LONDON

NORTH LONDON & HERTS

ESSEX

SOUTH EAST LONDON & KENT

2WELL PLACED PROPERTY ADVISORS GLENNY DATABOOK Q3 2016

Jan-Jun12

Jul-Dec 12

Jan-Jun 13

Jul-Dec13

Jan-Jun 14

Jul-Dec14

Jan-Jun 15

Jul-Dec15

Jan-Jun16

Jul-Sep 16

0

100

200

300

400

500

INDUSTRIAL PRIME INVESTMENT YIELDS

Prime yields remained stable during the summer months, with investors maintaining a strong interest in prime distribution and industrial property. Industrial yields now average 5.19% across the Glenny region, with strong covenant, long income property in East London and North London & Herts expected to attract yields of 4.75%. Locations in Essex and South East London & Kent are expected to trade at slightly higher levels.

INDUSTRIAL SECTOR AT A GLANCE… OFFICE SECTOR AT A GLANCE…

OFFICE INVESTMENTMARKET TRANSACTIONS

Investment market activity in the of� ce sector slowed signi� cantly in the second and third quarters of 2016 after the strong activity recorded in q1. Total transactions for the year to date stand at £973m, with almost three quarters of the total transacted in the � rst three months of the year. The largest deal in the six months to the end of September was the £131m purchase of Columbus Courtyard E14 by the Chinese group HNA Investment Holdings. Chinese developer, Knight Dragon, also purchased the Mitre Building Greenwich for £60m.

OFFICE PRIME INVESTMENT YIELDS

Following a slight outward movement in the � rst three months of the year, average prime of� ce yields stabilised in the summer months at 6.11% although transaction levels slowed signi� cantly. Investments let to good covenants, with in excess of 10 years remaining on the lease, will still attract strong interest from investors. Overseas investors have been particularly active over the past six months, probably due to the weakness in £sterling following the EU exit vote.

OFFICE MARKET TAKE UP

Of� ce take up is expected to record its lowest annual total for three years in 2016, with total activity in the � rst nine months of the year standing at 1.8m sq ft. Most locations in the Glenny region have seen activity fall below their long run trend level of activity, the only exception to this being the North London & Herts market, where take up was boosted by the 148,600 sq ft sub let of EE’s former of� ces to Ocado at Hat� eld Business Park.

OFFICE MARKET RENTS

Prime rents rose in seven of the 12 locations featured in the new Glenny rent survey, resulting in average growth of 5.2% in the year to September 2016. As with the industrial market, a shortage of grade A supply has led to a stronger growth performance in secondary rents, which have risen by 9.0% over the comparable period. The strongest growth in secondary rents was seen in Braintree and En� eld, where rents were up by 25.7% and 23.3% respectively.

INDUSTRIAL INVESTMENTMARKET TRANSACTIONS

Investors have continued to favour industrial property in the � rst three quarters of 2016, with £422m of transactions completed in the Eastern M25 market. If the current trend continues into the � nal quarter of the year, overall investment levels are expected to rival 2015, which was a record year for transactions. The most signi� cant transaction in the six months to the end of September 2016 was Legal & General’s forward purchase of the 2.2m sq ft Amazon building at London Distribution Park, Tilbury for £150m, re� ecting a net initial yield of 5.25%.

INDUSTRIAL MARKET TAKE UP

Take up in the industrial market has maintained its overall trend level in the year to date but the total is distorted by the 2.2m sq ft pre let to Amazon at London Distribution Park. In general, take up has reduced, with lack of supply holding back the number of transactions completing, particularly at the larger (>50,000 sq ft) end of the market. Current demand has remained strong, with a total of 15.3m sq ft of requirements on the Glenny system.

INDUSTRIAL MARKET RENTS

The lack of grade A industrial � oor space across the Glenny region has seen prime rental growth slow over the past 12 months, with average growth of 4.3% across all Glenny locations. Occupiers have had to focus their attention on second hand space, causing secondary rents to grow at more than double the rate of the prime market values, up by 9.6% over the comparable period. The strongest growth in secondary rents has been seen in Dartford and our newly featured North London location, Tottenham/Edmonton.

000

SQ

FT

£PSF £PSF

£M’S

£M’S

000

SQ

FT

Jan-Jun12

Jul-Dec 12

Jan-Jun 13

Jul-Dec13

Jan-Jun 14

Jul-Dec14

Jan-Jun 15

Jul-Dec15

Jan-Jun16

Jul-Sep 16

0

1,000

2,000

3,000

4,000

5,000

0.0 2.5 5.0 7.5 10.0 12.5 15.0 17.5

S E LONDON & KENT

ESSEX£9.25

£11.50

£16.00E LONDON DOCKLANDS

N LONDON & HERTS£12.00

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

2011 Q3 20162012 2013 2014 2015

Jan-Jun12

Jul-Dec 12

Jan-Jun 13

Jul-Dec13

Jan-Jun 14

Jul-Dec14

Jan-Jun 15

Jul-Dec15

Jan-Jun16

Jul-Sep 16

0

500

1,000

1,500

2,000

2,500

3,000

3,500

0 10 20 30 40 50

S E LONDON & KENT

ESSEX£26.00

£30.00

£47.50

£38.00

E LONDON DOCKLANDS

E LONDON (OTHER)

N LONDON & HERTS£22.00

Jan-Jun12

Jul-Dec 12

Jan-Jun 13

Jul-Dec13

Jan-Jun 14

Jul-Dec14

Jan-Jun 15

Jul-Dec15

Jan-Jun16

Jul-Sep 16

0

500

1,000

1,500

2,000

2,500

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

2011 Q3 20162012 2013 2014 2015

DOCKLANDS PRIME OFFICE YIELD

AVERAGE PRIME OFFICE YIELD

10YR GILT YIELD AVERAGE PRIME OFFICE YIELD 10YR GILT YIELD

WELL PLACED PROPERTY ADVISORS GLENNY DATABOOK Q3 2016 3

DEMANDSUPPLYMARKET COMMENT RENTS & CAPITAL VALUES

The announcement of the Amazon pre let of 2.2m sq ft at Roxhill and Forth Ports London Distribution Park Tilbury has dominated Essex industrial market activity in q3 2016. The deal is set to be Europe’s largest logistics pre let and the � rst four storey distribution centre in the UK.

In addition to the Tilbury pre let, Amazon also took a 125,000 sq ft unit at Bericote and Blackrock’s Tower Thurrock. The three unit scheme, which was speculatively built, has only one unit remaining, the 100,000 sq ft Unit 3.

Supply has continued to tighten, with total availability now under 2.2m sq ft. Grade A supply is dominated by four larger units, two at London Gateway and two at West Thurrock, which account for 97% of total grade A space on the market.

Demand remains strong, with total requirements now at the highest level on record for the Essex market at 10.5m sq ft. Larger requirements account for two thirds of the overall total, having risen by 78% from their q1 level. Mid range requirements (25,001-50,000 sq ft) registered the most signi� cant increase however, with total demand up by 85% to 1.9m sq ft.

INDUSTRIAL MARKET AVAILABILITY(as at September 2016)

INDUSTRIAL MARKET REQUIREMENTS(as at September 2016)

INDUSTRIAL MARKET DEMAND RENTS & CAPITAL VALUES INDUSTRIAL

NO OF REQS (RHS)000 SQ FT RENTAL VALUES CAPITAL VALUES (RHS)POOR 2ND HAND GOOD 2ND HAND GRADE A

£ PSFRENTS

CAPITALVALUES

PRIME SECONDARY PRIME

BASILDON £8.00 £6.75 £130

BRAINTREE £7.75 £5.75 £125

CHELMSFORD £8.75 £7.00 £140

THURROCK £9.25 £7.75 £150

INDUSTRIAL MARKET TAKE-UP INDUSTRIAL MARKET AVAILABILITY

INDUSTRIAL

TOTAL AVAILABILITY 2.2M SQ FT PERCENTAGE OF SQ FT DEMANDED

7%0–5,000

8%5,001–10,000

12%10,001–25,000

14%25,001–50,000

59%> 50,000

12%SUPPLY

3%0–5,000

4%5,001–10,000

9%10,001–25,000

18%25,001–50,000

66%> 50,000

61%DEMAND

Jan-Jun12

Jul-Dec 12

Jan-Jun 13

Jul-Dec13

Jan-Jun14

Jul-Dec14

Jan-Jun15

Jul-Dec15

Jan-Mar16

Jul-Sep 16

0

500

1,000

1,500

2,000

2,500

158%TREND

000 SQ FT

10 yr average

000 SQ FT

Sep16

Jun 12

Dec12

Jun13

Dec13

Jun14

Dec14

Jun15

Dec15

Jun16

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

000 SQ FT No.

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

11,000

Sep16

Jun 12

Dec12

Jun13

Dec13

Jun14

Dec14

Jun15

Dec15

Jun16

0

50

100

150

200

250

300

350

x%RENT

x%CAPVAL

0

2

4

6

8

10

£ SQ FT £ SQ FT

0.0%RENT

7.1%CAPVAL

Sep16

Jun 12

Dec12

Jun13

Dec13

Jun14

Dec14

Jun15

Dec15

Jun16

0

20

40

60

80

100

120

140

160

ESSEX


DEMANDSUPPLY RENTS & CAPITAL VALUES

OFFICESESSEX

MARKET COMMENT

Following on from the record levels of activity recorded in 2015, when take up reached 500,000 sq ft over the year, the � rst three quarters of 2016 has seen activity levels fall below trend levels, with 183,500 sq ft of letting recorded. The most signi� cant transaction over the past nine months was the 30,000 sq ft pre let to Sky at St James Road, Brentwood.

Supply edged up slightly over the past two quarters, rising by 5% to 757,000 sq ft, largely due to 75,000 sq ft of grade A space coming to the market at Coval Wells, Chelmsford, of which 10,000 sq ft has been let. Hyatt Place Chelmsford offers the other major grade A accommodation, with 22,960 sq ft over four � oors, the top � oor having already been let.

Demand has recovered from the downturn which began in the second half of 2015, with current requirements standing at 520,000 sq ft, the highest level of demand since 2007/08. The most signi� cant change in demand has been seen at the larger end of the market, with requirements for buildings of 25,000 sq ft and above increasing.

Prime rents in both Chelmsford (£26.00 per sq ft) and Brentwood (£25.00 per sq ft) remained stable, although both Basildon and Braintree saw increases, with sentiment driving rents up by 3.6% and 6.7% to £17.00 per sq ft and £16.00 per sq ft respectively.

OFFICE MARKET REQUIREMENTS(as at September 2016)

OFFICE MARKET AVAILABILITY(as at September 2016)

OFFICE MARKET AVAILABILITYOFFICE MARKET TAKE-UP

£ PSFRENTS

CAPITALVALUES


BASILDON £17.00 £13.00 £200

BRAINTREE £16.00 £11.00 £200

BRENTWOOD £25.00 £17.00 £300

CHELMSFORD £26.00 £19.00 £325

OFFICE MARKET DEMANDS RENTS & CAPITAL VALUES OFFICE


000 SQ FT

0

50

100

150

200

250

300

28%TREND

10 yr average

Jan-Jun12

Jul-Dec 12

Jan-Jun 13

Jul-Dec13

Jan-Jun14

Jul-Dec14

Jan-Jun15

Jul-Dec15

Jan-Mar16

Jul-Sep 16

000 SQ FT

Sep16

Jun 12

Dec12

Jun13

Dec13

Jun14

Dec14

Jun15

Dec15

Jun16

0

250

500

750

1,000

1,250

1,500

1,750

2,000

000 SQ FT No.

0

100

200

300

400

500

600

Sep16

Jun 12

Dec12

Jun13

Dec13

Jun14

Dec14

Jun15

Dec15

Jun16

0

10

20

30

40

50

60

Sep16

Jun 12

Dec12

Jun13

Dec13

Jun14

Dec14

Jun15

Dec15

Jun16

£ SQ FT £ SQ FT

0

5

10

15

20

25

30

0.0%RENT

12.1%CAPVAL

Sep16

Jun 12

Dec12

Jun13

Dec13

Jun14

Dec14

Jun15

Dec15

Jun16

0

50

100

150

200

250

300

350

19%0–5,000

11%5,001–10,000

40%10,001–25,000

9%> 50,000

21%25,001–50,000

5%SUPPLY

11%0–5,000

9%5,001–10,000

23%10,001–25,000

24%> 50,000

33%25001–50,000

24%DEMAND



DEMANDSUPPLY RENTS & CAPITAL VALUESMARKET COMMENT

Take up continued to be hindered by the lack of supply in the East London industrial market, with activity remaining below trend levels since the � rst half 2014. Activity in the year to the end of September 2016 has totalled 660,000 sq ft, 37% below the trend level of activity. The largest letting over the � rst three quarters of the year was the 232,965 sq ft letting to Coca Cola at Logic 233 Hindmans Way, Dagenham.

Supply has fallen below 1m sq ft for the � rst time on record, with only 708,500 sq ft of availability at the end of September 2016. Grade A supply stands at 86,000 sq ft, with the majority of stock (80%) at Standard Life and Ravenbourne’s Thames Gateway Park. A further 141,700 sq ft is under construction at the park, in three units. The overall availability rate now stands at 1.1%.

Demand continued to recover from the slowing in the second half of 2015, with a new record level of requirements recorded in the six months to September 2016, 9.1m sq ft. The main increase in requirements has been for units of 25,000 sq ft and above, where demand has risen by 38%.

Whilst prime rents have remained stable, the shortage of supply has seen secondary rents increase, with all areas recording an improvement. The most signi� cant rises were seen in Canning Town and Beckton, where values have increased by 12.0% and 9.5% respectively.

INDUSTRIAL MARKET REQUIREMENTS (as at September 2016)


INDUSTRIAL MARKET AVAILABILITYINDUSTRIAL MARKET TAKE-UP INDUSTRIAL MARKET DEMAND RENTS & CAPITAL VALUES INDUSTRIAL

£ PSFRENTS

CAPITALVALUES


BARKING / DAGENHAM £13.00 £9.50 £200

BECKTON /ROYALS £13.50 £11.50 £210

ROMFORD £10.50 £8.50 £140

STRATFORD / CANNING TOWN £16.00 £14.00 £275


9%0–5,000

20%5,001–10,000

35%10,001–25,000

36%25,001–50,000

47%SUPPLY

3%0–5,000

4%5,001–10,000

11%10,001–25,000

20%25,001–50,000

62%> 50,000

29%DEMAND

000 SQ FT

0

200

400

600

800

1,000

1,200

1,400

10 yr average

37%TREND

Jan-Jun12

Jul-Dec 12

Jan-Jun 13

Jul-Dec13

Jan-Jun14

Jul-Dec14

Jan-Jun15

Jul-Dec15

Jan-Mar16

Jul-Sep 16

000 SQ FT

Sep16

Jun 12

Dec12

Jun13

Dec13

Jun14

Dec14

Jun15

Dec15

Jun16

0

1,000

2,000

3,000

4,000

5,000

6,000

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

Sep16

Jun 12

Dec12

Jun13

Dec13

Jun14

Dec14

Jun15

Dec15

Jun16

000 SQ FT No.

0

50

100

150

200

250

300

£ SQ FT £ SQ FT

0.0

2.5

5.0

7.5

10.0

12.5

15.0

17.5

0.0%RENT

0.0%CAPVAL

Sep16

Jun 12

Dec12

Jun13

Dec13

Jun14

Dec14

Jun15

Dec15

Jun16

0

50

100

150

200

250

300

INDUSTRIAL


EAST LONDON



EAST LONDON

MARKET COMMENT

Take up in both Docklands and the rest of the East London of� ce market has fallen below trend levels of activity in the � rst three quarters of 2016, with Docklands recording activity of 650,000 sq ft for the nine months and the rest of the East London of� ce market 290,000 sq ft.

Docklands activity has been dominated by the 316,000 sq ft letting to Thomson Reuters at 5 Canada Square in q1, with the largest deal in the East London market being the 53,500 sq ft letting to technology incubator company ENTIQ at Here East in the Queen Elizabeth Park.

The supply of grade A stock in the rest of East London market has been boosted by the release of stock at Here East, Queen Elizabeth Olympic Park, with both the former International Broadcast Centre and the Press Centre coming to the market. These two buildings provide approximately 360,000 sq ft of of� ce and TMT studio space.

Demand has edged back up to 577,500 sq ft following the satisfaction of the FCA and TfL requirements in mid 2015. A number of larger requirements have boosted overall demand, although smaller requirements have weakened, probably as a response to increased uncertainty following the vote to leave the EU.

DOCKLANDS OTHER



£ PSFRENTS

CAPITALVALUES


BARKING / DAGENHAM £16.00 £13.50 £175

ROYALS £32.50 £21.00 £650

ROMFORD £14.50 £11.00 £190

STRATFORD £38.00 £20.00 £750

OFFICE MARKET TAKE-UP OFFICE MARKET AVAILABILITY OFFICE MARKET DEMAND RENTS & CAPITAL VALUES OFFICE


7%0–5,000 7%

5,001–10,000

12%10,001–25,000

12%25,001–50,000

62%> 50,000

23%SUPPLY

11%0–5,000

10%5,001–10,000

25%10,001–25,000

22%25,001–50,000

32%> 50,000

25%DEMAND

000 SQ FT

0

100

200

300

400

500

600

700

800

900

Other 10 yr average

Docklands 10 yr average

22%TREND

Jan-Jun12

Jul-Dec 12

Jan-Jun 13

Jul-Dec13

Jan-Jun14

Jul-Dec14

Jan-Jun15

Jul-Dec15

Jan-Mar16

Jul-Sep 16

OFFICE MARKET TAKE-UP000 SQ FT000 SQ FT

Sep16

Jun 12

Dec12

Jun13

Dec13

Jun14

Dec14

Jun15

Dec15

Jun16

0

500

1,000

1,500

2,000

2,500

3,000

3,500

OFFICE MARKET AVAILABILITY000 SQ FT No.

0

250

500

750

1,000

1,250

1,500

Sep16

Jun 12

Dec12

Jun13

Dec13

Jun14

Dec14

Jun15

Dec15

Jun16

0

10

20

30

40

50

60

0

10

20

30

40

50

Sep16

Jun 12

Dec12

Jun13

Dec13

Jun14

Dec14

Jun15

Dec15

Jun16

£ SQ FT £ SQ FT

0

100

200

300

400

500

600

700

800

0.0%RENT

0.0%CAPVAL

RENTS & CAPITAL VALUES OFFICE

OFFICES

NO OF REQS (RHS)000 SQ FT DOCKLANDSOTHERS CAPITAL VALUES (RHS)POOR 2ND HAND GOOD 2ND HAND GRADE A



Constricted supply has continued to affect the take up numbers, which are expected to fall below trend for the second successive year in 2016. Activity in the � rst nine months of the year reached 954,000 sq ft. There were a number of signi� cant sized transactions which contributed to a strong third quarter, such as the two pre lets at En� eld Distribution Park, with Cooks Delight taking 50,000 sq ft and DFS a further 44,500 sq ft.

Supply edged up slightly to 2.2m sq ft. Overall availability is boosted by several larger units that came to the market although more than 54% of larger units are located in Harlow. The availability rate remains close to its recent low point at 3.7%.

Demand continued to be strong, surpassing the previous peak level of 9.5m sq ft at the end of 2014. Overall demand in the six months to September 2016 was recorded at 10.2m sq ft, with more than 83% of requirements for units of 25,000 sq ft and above. Requirements for units below 25,000 sq ft eased slightly.

Both prime and secondary rents increased in the two inner M25 markets of En� eld and Tottenham/Edmonton rising by 15.0% and 9.1% respectively. Outer M25 rents remained stable at their q1 2016 levels.

INDUSTRIAL MARKET AVAILABILITYINDUSTRIAL MARKET TAKE-UP


INDUSTRIAL MARKET DEMAND


£ PSFRENTS

CAPITALVALUES


ENFIELD £11.50 £9.50 £200

HARLOW £7.75 £6.75 £140

HODDESDON £8.50 £6.50 £135

TOTTENHAM /EDMONTON £12.00 £10.00 £200

RENTS & CAPITAL VALUES INDUSTRIAL


7%0–5,000

8%5,001–10,000

14%10,001–25,000

20%25,001–50,000

51%> 50,000 16%

SUPPLY

3%0–5,000 4%

5,001–10,000

10%10,001–25,000

18%25,001–50,000

65%> 50,000

12%DEMAND

0

250

500

750

1,000

1,250

25%TREND

000 SQ FT

10 yr average

Jan-Jun12

Jul-Dec 12

Jan-Jun 13

Jul-Dec13

Jan-Jun14

Jul-Dec14

Jan-Jun15

Jul-Dec15

Jan-Mar16

Jul-Sep 16

000 SQ FT

Sep16

Jun 12

Dec12

Jun13

Dec13

Jun14

Dec14

Jun15

Dec15

Jun16

0

1,000

2,000

3,000

4,000

5,000

6,000

0

2,000

4,000

6,000

8,000

10,000

12,000

000 SQ FT

Sep16

Jun 12

Dec12

Jun13

Dec13

Jun14

Dec14

Jun15

Dec15

Jun16

No.

0

50

100

150

200

250

300

350

0

2

4

6

8

10

12

14

£ SQ FT £ SQ FT

Sep16

Jun 12

Dec12

Jun13

Dec13

Jun14

Dec14

Jun15

Dec15

Jun16

0

50

100

150

200

250

20.0% 0.0%RENT CAPVAL

INDUSTRIAL






OFFICE MARKET REQUIREMENTS (as at September 2016)


MARKET COMMENT

Unlike most other of� ce markets in the Glenny region, North London and Herts saw take up exceed the trend level of activity in the � rst half of the year, due primarily to Ocado sub letting 148,600 sq ft at Hat� eld Business Park from mobile phone operator EE.

Supply has continued on a downward trajectory, falling below 1m sq ft for the � rst time since 2006. Total availability at the end of September 2016 stood at 890,000 sq ft, which equates to an availability rate of 3.8%.

Demand has continued to improve, rising to 504,000 sq ft in the six months to the end of September 2016. Several larger requirements have boosted the overall demand for space, although there has been a signi� cant weakening in requirements of buildings of less than 25,000 sq ft.

Prime rents have continued to rise, with of� ce rents in En� eld having increased by 33% over the past 12 months from £18.50 per sq ft to £22.00 per sq ft. Secondary rents in En� eld have followed a similar trend, rising by 23% since mid 2015.

£ PSFRENTS

CAPITALVALUES


ENFIELD £22.00 £18.50 £275

HARLOW £15.00 £11.00 £200

HODDESDON £16.00 £12.00 £200

WELWYN GARDEN CITY £18.00 £15.00 £250

OFFICE MARKET AVAILABILITYOFFICE MARKET TAKE-UP OFFICE MARKET DEMAND RENTS & CAPITAL VALUES OFFICE


12%0–5,000

12%5,001–10,000

31%10,001–25,000

24%25,001–50,000

21%> 50,000

28%SUPPLY

10%0–5,000

9%5,001–10,000

16%10,001–25,000

40%25,001–50,000

25%> 50,000

7%DEMAND

000 SQ FT

0

50

100

150

200

250

300

350

6%TREND

10 yr average

Jan-Jun12

Jul-Dec 12

Jan-Jun 13

Jul-Dec13

Jan-Jun14

Jul-Dec14

Jan-Jun15

Jul-Dec15

Jan-Mar16

Jul-Sep 16

000 SQ FT

Sep16

Jun 12

Dec12

Jun13

Dec13

Jun14

Dec14

Jun15

Dec15

Jun16

0

500

1,000

1,500

2,000

2,500

3,000

000 SQ FT No.

0

100

200

300

400

500

600

700

800

900

Sep16

Jun 12

Dec12

Jun13

Dec13

Jun14

Dec14

Jun15

Dec15

Jun16

0

10

20

30

40

50

60

0.0

2.5

5.0

7.5

10.0

12.5

15.0

17.5

20.0

22.5

18.9%RENT CAPVAL

10.0%

Sep16

Jun 12

Dec12

Jun13

Dec13

Jun14

Dec14

Jun15

Dec15

Jun16

0

50

100

150

200

250

300

£ SQ FT £ SQ FT

OFFICES





MARKET COMMENT

Take up has slowed over the � rst three quarters of 2016 as uncertainty about the economic outlook and reduced supply impacted on occupier activity. Transactions totalled 1.1m sq ft for the nine months, signi� cantly below trend levels of activity.

The most signi� cant transaction in the six months to the end of September 2016 was the 116,650 sq ft letting to DX Network Services at The Interchange Swanley. A further 108,000 sq ft was let at Graviton Park Belvedere to Amazon.

Supply has tightened further, falling below 3m sq ft for the � rst time since 2006, ending q3 2016 at 2.9m sq ft. Grade A space increased slightly, rising to 629,360 sq ft, with more than 60% of stock in larger units. The largest grade A unit on the market is the 180,000 sq ft former Dixons Carphone Warehouse Erith 180. The availability rate stands at 2.6% at the end of September 2016.

Demand continued to recover, with total requirements of 6.6m sq ft in the six months to September 2016, but remains 19% below the recent peak recorded in 2014. The key driver to the upturn in demand has been the increase in requirements for units of 25,000 sq ft and above, where demand is up by 25% from the previous period.



INDUSTRIAL MARKET AVAILABILITYINDUSTRIAL MARKET TAKE-UP INDUSTRIAL MARKET DEMAND RENTS & CAPITAL VALUES INDUSTRIAL

£ PSFRENTS

CAPITALVALUES


ASHFORD £8.50 £5.50 £100

CHARLTON/WOOLWICH £11.00 £9.50 £155

DARTFORD £11.00 £9.50 £155

MAIDSTONE £7.25 £6.50 £135


12%0–5,000

17%5,001–10,000

26%10,001–25,000

14%25,001–50,000

31%> 50,000

21%SUPPLY

3%0–5,000 5%

5,001–10,000

11%10,001–25,000

25%25,001–50,000

56%> 50,000

6%DEMAND

000 SQ FT

0

250

500

750

1,000

1,250

1,500

1,750

2,000

10 yr average

46%TREND

Jan-Jun12

Jul-Dec 12

Jan-Jun 13

Jul-Dec13

Jan-Jun14

Jul-Dec14

Jan-Jun15

Jul-Dec15

Jan-Mar16

Jul-Sep 16

000 SQ FT

Sep16

Jun 12

Dec12

Jun13

Dec13

Jun14

Dec14

Jun15

Dec15

Jun16

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

000 SQ FT No.

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

Sep16

Jun 12

Dec12

Jun13

Dec13

Jun14

Dec14

Jun15

Dec15

Jun16

0

50

100

150

200

250

300

350

400

0

2

4

6

8

10

12

£ SQ FT £ SQ FT

4.5%RENT

3.3%CAPVAL

Sep16

Jun 12

Dec12

Jun13

Dec13

Jun14

Dec14

Jun15

Dec15

Jun16

0

25

50

75

100

125

150

175

INDUSTRIAL




Following on from the strong years activity in 2015, when more than 1m sq ft was let, take up has slowed in the � rst three quarters of 2016, with only 350,000 sq ft transacted. Only four transactions above 10,000 sq ft have been completed, the largest being the 20,950 sq ft letting to The Compass Company at Catford Road SE6.

Availability has fallen to its lowest level in 10 years as permitted development has reduced the supply in a number of locations. Total stock on the market stood at 1.4m sq ft at the end of q3 2016. Grade A availability represents only 8% of total supply, with the largest grade A building on the market being Boultbee Brooks Northside House, Bromley, where 24,840 sq ft is available.

Demand continued to recover from the downturn in the latter half of 2015, recording 453,000 sq ft in the six months to September 2016. This is the highest level of requirements registered since the recent peak of 740,000 sq ft in 2013/14.

Prime of� ce rents have moved higher, rising across all locations, with the most signi� cant increase being seen in Bromley, where rents were up by 19.0%. Secondary rents also improved, increasing by 13.7% on average.



OFFICE MARKET AVAILABILITYOFFICE MARKET TAKE-UP OFFICE MARKET DEMAND RENTS & CAPITAL VALUES OFFICE

£ PSFRENTS

CAPITALVALUES


BROMLEY £25.00 £16.00 £280

DARTFORD £25.00 £15.00 £265

GREENWICH £30.00 £15.00 £300

MAIDSTONE £20.00 £12.00 £225


24%0–5,000

20%5,001–10,000

29%10,001–25,000

11%25,001–50,000

16%> 50,000

10%SUPPLY

8%0–5,000

10%5,001–10,000

17%10,001–25,000

15%25,001–50,000

50%> 50,000

59%DEMAND

000 SQ FT

0

100

200

300

400

500

600

700

800

10 yr average

35%TREND

Jan-Jun12

Jul-Dec 12

Jan-Jun 13

Jul-Dec13

Jan-Jun14

Jul-Dec14

Jan-Jun15

Jul-Dec15

Jan-Mar16

Jul-Sep 16

000 SQ FT

Sep16

Jun 12

Dec12

Jun13

Dec13

Jun14

Dec14

Jun15

Dec15

Jun16

0

500

1,000

1,500

2,000

2,500

3,000

3,500

0

100

200

300

400

500

600

700

800

Sep16

Jun 12

Dec12

Jun13

Dec13

Jun14

Dec14

Jun15

Dec15

Jun16

000 SQ FT No.

0

5

10

15

20

25

30

35

40

45

50

£ SQ FT £ SQ FT

0

5

10

15

20

25

30

35

RENT CAPVAL11.1% 3.4%

0

50

100

150

200

250

300

350

Sep16

Jun 12

Dec12

Jun13

Dec13

Jun14

Dec14

Jun15

Dec15

Jun16

OFFICES





WELL PLACED PROPERTY ADVISORS

This document is for general informative purposes only. The information in it is believed to be correct, but no express or implied representation or warranty is made by Glenny LLP as to its accuracy or completeness, and the opinions in it constitute our judgement as of this date but are subject to change. Reliance should not be placed upon the information or forecasting opinions set out herein for the purpose of any particular transaction, and no responsibility or reliability, whether in negligence or otherwise, is accepted by Glenny LLP or by any of its members, of� ces, employees, agents or representatives for any direct, indirect consequential loss or damage which may result from any such reliance or other use thereof.

All rights reserved. No part of this publication may be transmitted or reproduced in any material form by any means, electronic, recording, mechanical, further copying or otherwise, or stored in any information storage or retrieving system of any nature, without prior written permission of the copyright holder except in accordance with the provisions of the Copyright Design and Patent Act 1988.

Warning: the doing of an unauthorised act in relation to a copyright work may result in both a civil claim for damages and criminal prosecution November 2016.

CONTACTEAST LONDON

Peter Higgins - 020 8591 6671 Fifth Floor, Unex Tower, Station Street, Stratford, London E15 1DA

ESSEX

Jim O’Connell - 01268 540 771 3 Argent Court, Sylvan Way, Basildon, Essex SS15 6TH

DEVELOPMENT & INVESTMENT

John Bell and James McFeely - 020 8591 6671Fifth Floor, Unex Tower, Station Street, Stratford, London E15 1DA

RESEARCH

For more information email [email protected]


Ivan Scott - 020 8367 23341 Cross� eld Chambers, Gladbeck Way, En� eld, Middlesex EN2 7HR


Richard Seton-Clements - 020 8304 4911 21 Bourne Road, Bexley, Kent DA5 1LW

HERTFORDSHIRE

NORTH LONDON

EAST LONDON

SOUTH EAST

LONDON

ESSEX

KENT

3

4

1

2

1

3

5

6

4

21

1

2

3

4

5

23

4

5

OFFICE RENT CAPITAL VALUES

1 STRATFORD £38.00 £750

2 ROYALS £32.50 £650

3 BARKING / DAGENHAM / RAINHAM £16.00 £175

4 ROMFORD £14.50 £190

2 ENFIELD £22.00 £275

3 WELWYN GARDEN CITY £18.00 £250

4 HODDESDON / CHESHUNT £16.00 £200

5 HARLOW £15.00 £200

1 BRAINTREE £16.00 £200

2 CHELMSFORD £26.00 £325

3 BRENTWOOD £25.00 £300

4 BASILDON £17.00 £200

1 GREENWICH £30.00 £300

3 BROMLEY £25.00 £280

4 DARTFORD £25.00 £265

5 MAIDSTONE £20.00 £225

INDUSTRIAL RENT CAPITAL VALUES

1 CANNING TOWN £16.00 £275

2 BECKTON £13.50 £210

3 BARKING / DAGENHAM / RAINHAM £13.00 £200

4 ROMFORD £10.50 £140

1 TOTTENHAM / EDMONTON £12.00 £200

2 ENFIELD £11.50 £200

4 HODDESDON / CHESHUNT £8.50 £135

5 HARLOW £7.75 £140

1 BRAINTREE £7.75 £125

2 CHELMSFORD £8.75 £140

4 BASILDON £8.00 £130

5 THURROCK £9.25 £150

2 CHARLTON / WOOLWICH £11.00 £155

4 DARTFORD £11.00 £155

5 MAIDSTONE £7.25 £135

6 ASHFORD £8.50 £100

KEY: CHANGES IN THE PAST 6 MONTHS

INCREASE DECREASENO CHANGE

RENTS AND VALUES

MARKET COMMENT

A lack of supply of grade A space in both the industrial and of� ce sectors has held back the growth in prime rents over the past 12 months. Prime of� ce rents grew by 5.2% in the year to the end of q3 2016, compared to 14.2% a year earlier. Industrial prime rental growth eased back to 4.6% from 10.8% one year earlier. The shortages in supply, however, have seen secondary rents gather momentum, with of� ce secondary rents up by 9.0% and industrial rents up by 9.6%.

Whilst a number of locations saw prime rents remain stable, secondary rents increased in 88% of the industrial locations in the Glenny rent survey, whilst secondary of� ce rents increased in 69% of locations.


WELL PLACED PROPERTY ADVISORS



Warning: the doing of an unauthorised act in relation to a copyright work may result in both a civil claim for damages and criminal prosecution November 2016.

CONTACTEAST LONDON

Peter Higgins - 020 8591 6671 Fifth Floor, Unex Tower, Station Street, Stratford, London E15 1DA

ESSEX

Jim O’Connell - 01268 540 771 3 Argent Court, Sylvan Way, Basildon, Essex SS15 6TH

DEVELOPMENT & INVESTMENT

John Bell and James McFeely - 020 8591 6671Fifth Floor, Unex Tower, Station Street, Stratford, London E15 1DA

RESEARCH

For more information email [email protected]


Ivan Scott - 020 8367 23341 Cross� eld Chambers, Gladbeck Way, En� eld, Middlesex EN2 7HR


Richard Seton-Clements - 020 8304 4911 21 Bourne Road, Bexley, Kent DA5 1LW

EAST LONDON

ESSEX

KENT

SOUTH EAST

LONDON

NORTH LONDON

HERTFORDSHIRE

PRIME YIELDS

NORTH LONDON & HERTSKEY DEAL

Elizabeth French House Langston Road Loughton - Salaft Properties agreed a sale & leaseback of Kier Construction’s of� ces in Loughton. Salaft paid £6.5m for the 17,125 sq ft of� ces, with the purchase price representing a net initial yield of 5.44% off a rent of £22.00 per sq ft.

SOUTH EASTLONDON & KENT KEY DEAL

Graviton Park Belvedere – CBRE Global Investors purchased the recently completed three unit development from Wrenbridge Land and Palmer Capital Partners for £15.1m. The development was purchased vacant, with a letting of the entire 108,000 sq ft buildings achieved shortly after purchase.

ESSEXKEY DEAL

Amazon Ful� lment Centre London Distribution Park Tilbury – Legal & General Property purchased the 2.2m sq ft distribution unit for £150m in August 2016 from Roxhill Developments and Forth Ports, the purchase price representing a net initial yield of 5.25%. Amazon signed an agreement to lease earlier in the month, with the new building the � rst four storey distribution centre in the UK.

PRIME OFFICE YIELDS

PRIME INDUSTRIAL YIELDS



PRIME OFFICE YIELDS

YEAR YEAR

YEAR YEAR

PRIME OFFICE YIELDS

YEAR

YEAR

EAST LONDON KEY DEAL

17 Columbus Courtyard, E14 – Chinese conglomerate HNA Group purchased the 195,500 sq ft Columbus Courtyard building for £131m from Vico Capital. The building is leased to Credit Suisse until 2024, with the tenant having the option to extend for a further 15 years at the end of the term. The purchase price re� ected a net initial yield of 4.59%.

PRIME OFFICE YIELDS

EAST LONDON – OTHER DOCKLANDS

YEAR


4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

06 Q3 201607 08 09 10 11 12 13 14 15

NORTH LONDON

4.75%Q3 2016

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

06 Q3 201607 08 09 10 11 12 13 14 15

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

06 Q3 201607 08 09 10 11 12 13 14 15

6.45%Q3 2016

6.00%Q3 2016

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

06 Q3 201607 08 09 10 11 12 13 14 15

ESSEX

5.75%Q3 2016

06 Q3 201607 08 09 10 11 12 13 14 15

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

SE LONDON AND KENT

06 Q3 201607 08 09 10 11 12 13 14 15

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

6.50%Q3 2016

5.50%Q3 2016

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

06 Q3 201607 08 09 10 11 12 13 14 15

EAST LONDON

4.75%Q3 2016

3.5%

4.5%

5.5%

6.5%

7.5%

8.5%

9.5%

06 Q3 201607 08 09 10 11 12 13 14 15

4.75%Q3 2016

DOCKLANDS

5.50%Q3 2016

OTHER

SPECIALISTADVICEAT EVERY STAGEOF THE PROPERTY LIFE CYCLE

ESSEX Jim O’Connell

01268 540 771

[email protected]

3 Argent Court, Sylvan Way, Basildon, Essex SS15 6TH

SOUTH EAST LONDON & KENT Richard Seton-Clements

020 8304 4911

[email protected]

21 Bourne Road, Bexley, Kent DA5 1LW

EAST LONDON Peter Higgins

020 8591 6671

[email protected]

Fifth Floor, Unex Tower, Station StreetStratford, London E15 1DA

NORTH LONDON & HERTSIvan Scott

020 8367 2334

[email protected]

1 Cross� eld Chambers, Gladbeck Way, En� eld, Middlesex EN2 7HR

RESEARCH For more information email [email protected]

DEVELOPMENT & INVESTMENT John Bell and James McFeely

020 8591 6671

[email protected] / [email protected]


Q3 2016

RESEARCH

ARCHITECTURE

ASSET & PROPERTYMANAGEMENT

BUILDING CONSULTANCY

BUSINESS SPACE AGENCY

INVESTMENT

RESIDENTIAL DEVELOPMENT

REGENERATION & INFRASTRUCTURE

DEVELOPMENT

RESIDENTIAL MANAGING AGENTS

VALUATIONSERVICES

LEASE ADVISORY



Warning: the doing of an unauthorised act in relation to a copyright work may result in both a civil claim for damages and criminal prosecution. November 2016.

GREATER LONDONINDUSTRIAL

Glenny

SOUTH EAST OF ENGLAND

(EXCL. LONDON)

INDUSTRIAL

Glenny

REGIONAL RUNNER UP

STRATEGIC PLANNING



01268 540 771

[email protected]



020 8304 4911

[email protected]



020 8591 6671

[email protected]



020 8367 2334

[email protected]




020 8591 6671



Q3 2016

RESEARCH

ARCHITECTURE




INVESTMENT



DEVELOPMENT


VALUATIONSERVICES

LEASE ADVISORY





Glenny


(EXCL. LONDON)

INDUSTRIAL

Glenny

REGIONAL RUNNER UP

STRATEGIC PLANNING



01268 540 771

[email protected]



020 8304 4911

[email protected]



020 8591 6671

[email protected]



020 8367 2334

[email protected]




020 8591 6671



Q3 2016

RESEARCH

ARCHITECTURE




INVESTMENT



DEVELOPMENT


VALUATIONSERVICES

LEASE ADVISORY





Glenny


(EXCL. LONDON)

INDUSTRIAL

Glenny

REGIONAL RUNNER UP

STRATEGIC PLANNING

DEMAND REACHES RECORD LEVELS AFTER BREXIT VOTE

Demand for industrial floorspace reached record levels in the months following the BREXIT vote, according to our latest research.

John Bell, Head of Business Space and Investment Agency at Glenny, said;

“Our expectations were that demand would slow following the vote to leave the EU but in reality quite the opposite happened. As agents, the biggest issue we face at the moment is how to satisfy this pent up demand as stock levels continue to dwindle. This, in part, is due to a resistance within the institutional sector to fund speculative development; the obvious conundrum being what a hard Brexit might actually mean to the commercial property sector; right now it’s all still conjecture, uncertainty and sentiment.”

To put things into context, our research demonstrates that over the past six months demand for industrial floor space has risen to 15.3m sq ft with requirements for buildings of 25,000 sq ft upwards accounting for 80% of this total. Bell adds;

“The resurgence in demand has been driven by occupiers looking for units in the “mid” and “big box” size brackets, particularly amongst the e-tail and home delivery sectors within the M25. At the smaller end of the market, demand has remained steady but has not bounced back to the same extent. This is not unusual as many smaller requirements don’t make it on to agents’ registers.”

GLENNY NEWS21st November 2016

14,000

,000 sq ft

2008 2009 2010 2011 2012 2013 2014 2015 2016

12,000

10,000

8,000

6,000

4,000

2,000

0

> 25,000 sq ft

< 25,000 sq ft

www.glenny.co.uk

GLENNY NEWS21st November 2016

For more information contact

John BellHead of Business Space & Investment Agency

020 3141 [email protected]

Established in 1892 Glenny LLP offers services across the whole property lifecycle, operating from five strategic offices servicing clients regionally and nationally.

Glenny’s Business Space Agency team offers unrivalled regional knowledge of the east London, Essex, North London and Herts and South East London and Kent commercial property markets.

www.glenny.co.uk

It’s not just about size though - we also need to look at tenure. Most new product being delivered to the market of late has been leasehold due to the maturity of this asset class and the desire of institutional investors to hold this stock; freeholds remain in very scarce supply across all size ranges and grades, despite the premium values an occupier would be willing to pay as a consequence of the current low interest rate environment.

On the other side of the equation supply has continued to reduce and the overall availability level now stands at 8m sq ft across the Glenny region with about 26% of this in Garde A space - 2.1m sq ft. The mismatch between supply and demand has driven up rental values in most of our research locations, with some hot-spots seeing prime rents grow by as much as 50% over the past three years.

Bell comments:

“The rental growth story in many of our locations has become very compelling. Prime rents in many of our research towns have risen above £10.00 per sq ft but the shortage of grade A stock in most markets has had an even larger impact on better quality second hand stock.”

An example of this is in Canning Town, where prime rents have risen by 52% (or 15% per annum) over the past three years whilst secondary rents are up by 20% per annum. This is not an isolated incidence, with almost two thirds of the locations in the Glenny regions survey experiencing annualised growth in double digits over the past three years.

Bell states;

“This is a very strong story for investors and some have already committed to the area, with more than £1.1bn of industrial assets being purchased in the Glenny region over the past two years. The most recent examples of this trend have been Legal and General’s purchase of Amazon’s new 2.2m sq ft fulfilment centre at London Distribution Park in Tilbury and CBRE Global Investors’ purchase of Wrenbridge and Palmer Capital’s Graviton Park in Belvedere.”

The rental growth story looks set to continue for the foreseeable future and any new schemes are likely to be met with strong demand from both occupiers and investors.

Glenny LLP

21st November 2016

www.glenny.co.uk

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