Over the course of 2005 the Thames Valley market showed some signs of improvement, albeit patchy and far from full recovery. Whilst the overall number of transactions recorded was low, year on year take up was up by 8%, and up 12% when compared with 2003. Re absorption by corporates, and a lack of speculative development throughout the Thames Valley has helped to reduce supply levels. We do however expect to see some speculative development in 2006, to address particular local gaps. As market sentiment continues to improve we also expect demand to continue at a higher level leading to a hardening of market terms.

Thames Valley — Principal Transactions 2005

Thames Valley — Summary of Prime Rents Dec 05

The year for Reading broadly reflects the Thames Valley as a whole. Re absorption was the key in reducing supply from almost 1.8m sq ft at the beginning of the year to less than 1.6m sq ft at the end. In 2003 supply stood at a record level of over 2m sq ft. Pure take up this year (lettings) amounted to a little over 200,000 sq ft (about 50% of the long term average) whereas re absorption accounted for over 300,000 sq ft. Whilst there has been no new development since completion of Forbury Square and The Pinnacle in March 2003 we expect Abbey Mill House (108,000 sq ft) in the town centre and smaller buildings (30,000 sq ft) at GreenPark and Arlington Business Park to lead the way. Demand continues for both town centre and business park locations with a bias in terms of the number of enquiries for the town centre (usually requiring proximity to the station). Headline prime rents are currently in the order of £23 to £24 per sq ft with little differential between in town and out of town locations.

Reading — Supply Summary

Reading — Take Up Summary (>5,000 sq ft)

Reading — Re-absorption

Re-absorption has contributed significantly to a decrease in supply. In Reading alone 313,000 sq ft was reoccupied last year and ‘total availability’ has reduced from 2.1M sq ft to 1.6M sq ft over the period from 2003.

Reading — Speculative Starts Expected 2006

• Arlington is likely to make a speculative start during the first quarter of 2006 on its last remaining plot (Plot 1400). It plans to build 100,000 sq ft in three buildings of 25,000 sq ft, 30,000 sq ft and 45,000 sq ft respectively.
• PruPIM is planning a speculative start in the early part of 2006 on 260 South Oak Way, GreenPark, where it will construct a 30,000 sq ft building.
• PMB Holdings is also planning to start its 108,000 sq ft Abbey Mill House scheme located close to Forbury Square and the station.

The chart below shows supply and take up over 10 years. The average take up over the period is 580,000 sq ft. This includes the MCI, Veritas and Cisco transactions (GreenPark) in 2000 which significantly increases the average figure. The 5 year average for the period 2001 to 2005 is 216,000 sq ft.

The chart below shows take up by size band in Reading since 2000. It is interesting to see the quantum of take up within the sub 25,000 sq ft size band remains relatively consistent throughout. There has been no take up recorded in excess of 25,000 sq ft in the town since 2002.

The chart below shows the level of take up recorded in the town centre and out of town markets since 2000. In 2000, 91% of office transactions were recorded out of town, predominantly on business parks. It will be interesting in five years time to see if the town centre becomes more dominant with the developments at Station Hill, Chatham Place and Abbey Gate.

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For further information please contact:

MICHAEL BAKER BSc (Hons) MRICS
Head of Business Space

Tel: +44 (0)118 955 7084
email: m.baker@hicksbaker.co.uk

Hicks Baker
John Adams House
29 Castle Street
Reading
Berkshire
RG1 7SB

www.hicksbaker.co.uk

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