Three trends in the Soton office property market to emerge over the next few years, says CBRE

Three trends will drive the office property market in Southampton over the next few years, according to real estate agent CBRE.

They are change of use, the need to provide high quality refurbished offices with strong ESG (environmental, social and governance) credentials and the development of new buildings on a pre-let basis.

Real estate trends, opportunities and challenges were covered at CBRE Southampton’s s South Coast real estate market outlook briefing for investors and local businesses.

The event, which was attended by 60 people, was held at the Harbour Hotel in Ocean Village.

Jennet Siebrits, CBRE‘s UK Head of Research, provided an overview of the economy and its impact on property markets at the event.

She said that, compared to last year, there is greater optimism as interest rates are expected to begin to fall and real estate markets are likely to pick up.

She explained investors expect higher activity levels with many adopting an opportunistic strategy for 2024.

CBRE expects overall investment activity to reach more than £47bn around the UK, compared to just over £43bn in 2023.

James Brounger, Head of CBRE in Southampton, said there were both opportunities and challenges for the region’s office property market and, as a result, three trends will emerge.

He said: “The current economic climate is not allowing speculative development in the area; but occupiers and their employees are focusing on quality buildings, which have strong sustainability credentials.

“Employees want to work in high quality spaces, and employers will need to upgrade accordingly, prioritising wellbeing and sustainability in the workplace.

“However, just 15 per cent of Southampton’s offices have either an A or B EPC rating and there is a very limited supply of available high-quality offices in the area.

“Improvement via refurbishment to meet ESG credentials and specification of existing offices is likely to be a focus for many organisations.

“Similarly change of use of the poorest buildings as well as occupiers and developers working together to deliver new buildings on a pre-let basis will also be the key to managing the office stock.”

“Rents for high quality offices are anticipated to rise for refurbished space.

“At the end of last year Grade A rent rates jumped to £29.00 per sq. ft. from a previous high of £25.50 per sq. ft and we expect this to continue.

“However, pre-lettings will need to ignore rent market levels and calculate it with reference to the cost of the development’s delivery.”

At the event, Simon Philips, Director of Planning & Development covering Southampton and the Midlands, said recent changes in planning laws means there is now no floorspace limit for conversion of office space under permitted development (it was previously limited to 1,500sqm).

A recent example is Friary House in Southampton, formerly occupied by BT, which is to be converted into 46 residential apartments.

He added: “Changes in planning law mean there is now opportunity to drive economic growth through the redevelopment of vacant office buildings, with residential an attractive alternative use particularly in city centres.”

• https://www.cbre.com/