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South East Offices market health improves

Press Releases   •   Nov 15, 2011 14:08 GMT

The latest South East Office Snapshot from Colliers International has revealed that despite uncertainty in the economy, and a resulting low volume of turnover, the South East offices market continues to strengthen.

Key findings

  • Total M25 availability fell for the second successive quarter to stand at its lowest level for 12 months. Take-up surged in Q3 2011 rising by over 100% quarter on quarter. Q3 take-up totalled 1.2 million sq ft, which was the highest quarterly take-up since Q4 2010.
  • Overall, Thames Valley availability fell by 2% to reach 9.5 million sq ft. This is the lowest level of availability in over two years and represents an annual reduction of 6%.
  • The North M25 recorded its highest quarterly take-up since before the onset of the credit crunch,  with  Iveco (75,000 sq ft) in Watford and SOG plc (33,000 sq ft) in Hemel Hempstead.
  • The technology and media sector continues to drive demand in the South East market, accounting for close to 1 million sq ft of take-up in units over 5,000 sq ft in the year to date.

Guy Grantham, Director of Research & Forecasting at Colliers International commented: “Although starting from a low level, the Thames Valley saw take-up double quarter on quarter with a number of deals that had been under offer in Q2 2011 completing. Thames Valley vacancy now stands at a two year low.

“The North M25 recorded its highest quarterly take-up since before the onset of the credit crunch with major deals to Iveco (75,000 sq ft) in Watford and SOG (33,000 sq ft) in Hemel Hempstead. Total deals over 10,000 sq ft accounted for 165,000 sq ft of take-up, compared to just 44,000 sq ft in the entire first six months of 2011.

“The Technology and Pharmaceutical sectors remain extremely active and have been the key drivers of demand in 2011. The technology sector alone has accounted for over a third of all take-up in 2011 across the South East. For take-up of units in excess of 5,000 sq ft, Technology and Pharmaceutical occupiers account for 45% of all transactional activity since the start of 2010.” 

Philip Papenfus, Head of South East Offices at Colliers International commented: “We continue to see some progress in the overall health of the South East Office Market. However the volume is low based on historic turnover of space, a reflection of the uncertainty in the wider Economy.

“The market has again for this year been characterised by lease event led requirements and we will need to see more ‘balance sheet’ confidence return to see the larger corporate moves. We will also see a far greater number of named occupiers which we would hope might lead to further improvement next year when combined with the reduction in availability of Grade A supply in some prime centres, such as West London where there is now some evidence of rental growth.”

Philip Papenfus
Head of South East Offices
+44 20 7344 6788

Guy Grantham
Director, Research & Forecasting
+44 20 7344 6793

Sally Hooker
External Communications
+44 20 7344 6706 / +44 7920 202780

Colliers International latest property news The latest South East Office Snapshot from Colliers International has revealed that despite uncertainty in the economy, and a resulting low volume of turnover, the South East offices market continues to strengthen.

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Generation Y - Demand for office space to shrink 20% by 2050

Press Releases   •   Nov 15, 2011 14:07 GMT

Latest research from Colliers International has found that due to a declining workforce population, Europe is set to see a drop in demand for office space over the next few decades. 

The findings of the report reveal Europe is witnessing a shrinking working population, creating a base case scenario of a 10% reduction in demand for commercial (office and industrial) space across Europe over the next 20 years. This will be followed by a further 10% diminution over the subsequent 20 years to 2050. 

Today, the Baby Boomers dominate the workforce (at almost 45% of the working population) and their demands have been most adhered to when planning office environments to date, resulting in a high proportion of cellular office use as opposed to full open plan. By 2020 the influence of the Baby Boomers will have waned as it is effectively halved and by 2030 Baby Boomers will be virtually non-existent within the workforce. This will leave Generation Y and Z to dominate the workforce with greater involvement in decisions regarding the format and design of the workplace.

“We can expect a major change in the dominant style, motivations and methods of working and commuting within our modern workforce over the next 20 years,” says Guy Douetil, Managing Director, Corporate Solutions, EMEA, “Owning and creating the right type of space flexible enough to suit these changing styles and demand will become more critical for developers and owners to take into account.”

Office buildings typically have a 20 year life-cycle and long-term investments are funded over a 20 year term. For banks and investors, it will be vital to ensure that their office buildings are future–proofed as much as possible to meet these changing demand patterns. Failure to do so could mean higher vacancy, increased obsolescence (resulting in a requirement for higher levels of capital expenditure to upgrade stock) and lower rents, resulting in a weaker exit yield and reduced returns.

While these European-wide trends affect everyone, the national and local impact on employment and real estate markets can and will differ strikingly. On the face of it, eastern, southern and western European office markets will feel the brunt of a reduction in the workforce, and thus the demand for office space, while northern Europe will maintain marginal growth. However, when migration forecasts are taken into consideration based on economic opportunity, eastern European countries are experiencing the positive impact of outsourcing on jobs growth.

“We project that the outsourcing workforce in Eastern Europe could grow to over half a million by 2020,” comments Damian Harrington, Regional Director, Research and Forecasting, “This equates to 5.5 to six million square metres of office space, enough to fill the combined modern office stock of Warsaw and Prague.”

The Colliers International Generation Y white paper series explores the different aspects of how Generation Y will impact the real estate market.

Rebecca Degiorgio
Senior Media Officer
+44 20 8487 1621

Colliers International latest property news Latest research from Colliers International has found that due to a declining workforce population, Europe is set to see a drop in demand for office space over the next few decades.

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Specialist sectors continue to feel impact of reduced discretionary spe

Press Releases   •   Nov 14, 2011 14:14 GMT

Despite the impact of reduced discretionary spend upon the special sectors, many operators are beginning to see positive results as they focus on restructuring and their core businesses according to Colliers International’s latest Specialist Snapshot.

The key findings were:

  • Automotive & Roadside - There is a three-tiered roadside sector with the greatest values attributed to manufacturer tenants with strong covenants. Secure income streams with limited capital investment requirements remain in demand, while non-prime property continues to languish.
  • Recreational - 2011 has seen increased interest from mainstream and boutique funds in parks, marinas and leisure facilities in order to diversify investment portfolios and acquire alternative assets. The private market remains slow, being heavily reliant upon house sale equity and bank funding.
  • Healthcare - Falling fees, slower referral rates and increasing acuity of care is undermining operator performance. Corporate operators are beginning to look again at cost cutting measures in order to maintain profitability and generate sufficient capital to reinvest into the business.
  • Hotels - London hotels have recovered from the recession, while the provinces improve slowly. Well-financed budget chains continue to grab more market share as independents dwindle. Investor appetite remains strong.
  • Licensed and Leisure - The licensed and leisure industry is performing well in certain sectors, particularly in Central London. Investors remain interested in the sector but are still cautious, reflected by the marginal outward shift in yields, even for stronger covenants in prime locations, although demand for well-let leisure schemes remains good.

Dr. Walter Boettcher, Director, Research and Forecasting at Colliers International commented: “The specialist sector continues to feel the impact of cautionary discretionary spending as worries about the economy and Greece’s status in the EU remains uncertain. Operators are beginning to see positive results as they focus on restructuring and their core businesses. There is also evidence that bank funding is available for operators with strong balance sheets and proven management. Boutique funds increased their interest in certain sectors for diversification purposes.

"The Q3 GDP figures came in slightly above expectations but are still weak in terms of overall growth.
"The Eurozone debt crisis continues to stoke volatile markets, which is stimulating job security concerns as businesses are cautious in their investments. Government spending cuts continue to have an effect as the private sector hiring has yet to offset the public sector redundancies.”

Colliers International UK plc is part of Colliers International, now the world’s third largest commercial real estate organisation with 512 offices in 61 countries.

In the UK we employ over 700 people in 13 main offices and we understand how important in-depth local knowledge is to our clients. However, being an integral part of the newly aligned Colliers International also gives our clients access to over 12,500 professionals around the world and allows us to share comprehensive market knowledge.

Despite the impact of reduced discretionary spend upon the special sectors, many operators are beginning to see positive results as they focus on restructuring and their core businesses according to Colliers International’s latest Specialist Snapshot.

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Pre-lets at a high, but quarterly take up still significantly down

News   •   Oct 17, 2011 13:56 BST

New research from Colliers International has shown that Grade A office availability remained flat, and despite pre-letting activity at its highest level for some time, quarterly take-up is still significantly down across the Central London market for Q3 2011.

Mike MacKeith, Head of Central London Offices at Colliers International commented: “The market has seen a significant increase in pre-letting activity, which is at its highest for 12 months since the UBS deal at Broadgate. Prior to that, we have to go back to Q3 2007 to see a higher level”.

Central London office availability overall has remained flat at 7.7%, the first time quarterly vacancy has ceased to fall since Q3 2009. New and refurbished space rose slightly by 5%, driven mainly by the completion of Cannon Place. However, the City vacancy rate remains unchanged at 9.5%, suggesting continued steady absorption of space.

Despite this, a shortage of new supply still remains a concern. Focusing in on the West End, new and refurbished accommodation actually declined slightly by 3% and is now down by 33% in past 12 months.

In Mayfair, total availability has taken a dramatic fall by 43% in the past 12 months.

Anticipated development completions for the remainder of 2011 across all of Central London are expected to total 292,000 sq ft, bringing annual completions to 1.6m sq ft, compared to a 10 year average of 5.4m sq ft.

The Colliers International research also revealed that in the City market 65% of space completing in 2011 still remains vacant, compared to the West End market, where 75% of space completed in 2011 to date is either let or under offer.

Colliers International research has shown that Grade A office availability remained flat, and despite pre-letting activity at its highest level for some time, quarterly take-up is still significantly down across the Central London market for Q3 2011.

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District Heating seen as a positive, but are the benefits really understood?

News   •   Oct 12, 2011 14:06 BST

Colliers A recent study done by Colliers International shows there is significant support from the real estate sector to develop or own buildings linked to an environmentally friendly District Heating (DH) scheme, provided there are cost benefits and reliable supply guaranteed. Occupiers similarly would favour such buildings so long as they are not required to pay a total occupancy cost premium for the DH supply.

Colliers International was recently commissioned to undertake a brief survey of investors, developers and occupiers to gauge their respective views on the merits of a DH scheme, and the potential impact the technology could have on property values and rental levels.

When respondents were asked how they would view a development serviced by a DH scheme, almost 90% gave a “favourable” or “very favourable” answer, with the remainder giving a neutral stance. There were no negative responses.

One occupier responded, “Anything that enables businesses to use energy more efficiently and cheaply while helping the environment has to be positive”.

Although respondents were in favour of a DH scheme, the results proved it would be just one factor in a long list of due diligence considerations, and the cost benefit of such a system would be closely scrutinised, particularly by investors and developers. Many were concerned with the reliability of supply and restrictions a DH system may place on the onward sale of a property. 

Nick Katz, Colliers International Senior Sustainability Advisor, said the findings were not surprising, and very much in line with how sustainability and most energy efficiency projects are seen from the business community. 
  
“The responses in favour of the District Heating scheme were largely favourable to very favourable, with the belief that rents might be able to be modestly increased by 0-5%. However there is an obvious disconnect across the industry, with the majority of respondents feeling this would not have a positive impact on the value of the property.

“There is a lack of understanding about how these systems work and the cost benefits of these sustainable measures across the board, which presents the opportunity to advise and demonstrate that many of these systems actually have been successfully tried and tested and offer potential financial and environmental benefits for businesses,” Nick Katz added.

The District Heating Survey was conducted on behalf of Croydon Council by Colliers International Research in collaboration with senior professionals from Colliers International’s Sustainability division.

The survey was conducted in August 2011.

A recent study done by Colliers International shows there is significant support from the real estate sector to develop or own buildings linked to an environmentally friendly District Heating (DH) scheme.

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Colliers International to sell Travelodge Hotel, Marylebone

News   •   Oct 11, 2011 14:15 BST

Colliers International is offering for sale a prime hotel investment strategically situated adjacent to London’s Marylebone Railway station.

The hotel comprises 92 en-suite bedrooms and is let to Travelodge for an unexpired term of 30 years with the rent being reviewing 5 yearly to uncapped RPI. 

Tim Meakes, Investment Director of Colliers International commented: “The Travelodge Hotel in Marylebone occupies an excellent position and offers an investor an ideal opportunity to participate in the London hotel market with the benefit of inflation linked growth.”

Colliers International Director of Hotels, Colin Hall, added: “London is one of the most sought after hotel markets in the world and despite the recent slow down in world economy the hotel achieved an excellent average occupancy rate of over 90% for 2010.”

Colliers International is inviting offers in excess of £13,900,000 subject to contract for this exciting investment opportunity, which would represent an attractive net yield of 5.75%.

Colliers International is offering for sale a prime hotel investment strategically situated adjacent to London’s Marylebone Railway station.

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About Colliers International UK

Colliers International UK plc is part of Colliers International, now the world's third largest commercial real estate organisation with 512 offices in 61 countries.

In the UK we employ over 700 people in 13 main offices and we understand how important in-depth local knowledge is to our clients. However, being an integral part of the newly aligned Colliers International also gives our clients access to over 12,500 professionals around the world and allows us to share comprehensive market knowledge and intelligent insight into market trends globally as well as important relationships across the international marketplace.

This combination of unrivalled global coverage, accountability and financial strength with local ownership and expertise provides our clients with a unique operating model, one which ensures we can deliver comprehensive and truly pertinent solutions for each and every one.

Colliers International UK plc is quoted on the Alternative Investment Market of the London Stock Exchange under the code COL

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