Market Watch
Watford Office

Watford Office Market Watch
Watford Office Market Watch

17 May 2017, by Simon Preece

Record rents achieved as supply continues to fall

Snapshot of deals, supply and rents

■ The Watford office market is experiencing a buoyant period of transactional activity. Take-up for 2016 was 213,400 sq ft which was nearly three times 2015's total take-up and the highest amount since 2000. The strong levels of occupier demand has continued into 2017 as there has already been 105,000 sq ft transacted by the end of Q1.

 

Developer confidence has returned to the Watford market with Threadneedle speculatively developing a 60,000 sq ft building at Croxley Business Park and Boultbee Brooks Real Estate speculatively developing Clarendon Works a new 30,000 sq ft building which Savills have pre-let to Salmon.

■ Take-up in Watford has fluctuated in recent years and this can attributed to the availability of town centre stock. When there is Grade A town centre space available, there is considerable occupier demand. This was highlighted in 2016 at The Junction where a speculative refurbishment occurred which resulted in 74,000 sq ft of lettings, the building was fully let by the end of the year. Record rents were achieved in these series of lettings and underlines the benefits of delivering new or refurbished stock to the town centre market. This was further underlined at Clarendon Works where Salmon paid £31.50 per sq ft the record rent for Watford.

GRAPH 1

Take-up by grade

 
Graph 1

Source: Savills Research

■ Watford is an established office market and has an estimated stock level of 5.1 million sq ft, there is currently 103,882 sq ft available in Watford, 33% decrease from 2016. There is only 20,312 sq ft of Grade A space available, equating to 19% of total available supply. Of this Grade A supply,13,720 sq ft is under offer to HCL Technologies at £32.00 per sq ft at 45 Clarendon Road, Watford. This leaves only 6,592 sq ft of Grade A space, highlighting the chronic shortage of good quality supply.

Grade A space is the current occupier preference in the South East accounting for 65% of take-up in 2016. Out of town the shortage of Grade A space will be alleviated when Building 1 at Croxley Park achieves practical completion, adding 60,000 sq ft to the market, albeit it is expected this will let up before practical completion to an existing occupier on the park.

GRAPH 2

Availability by grade

 
Graph 2

Source: Savills Research

■ There have been 673,550 sq ft of requirements in the Northern Sector in 2017, the Watford market is unable to capitalise on this demand due to a lack of stock. Croxley Park does not achieve practical completion until Q4 2017 and the next town centre scheme, Gresham House, 53 Clarendon Road, will not be available until mid 2019 at the earliest.

Key requirements in the Northern Sector include Corona Energy, Apple and Harman who are both searching for 25,000 sq ft. Furthermore there are an estimated 783,470 sq ft of lease events in the next three years highlighting the strong potential demand for office space in the Watford market.

■ There has been strong rental growth in the Watford market in the last year, refurbished stock is now being transacted at £32.00 per sq ft whilst 12 months ago the same product was being let at £26.00 per sq ft underlining the increase in rents. With supply continuing to fall and occupier demand remaining strong, we believe prime rents could be in the region of £35.50 per sq ft by 2019.

GRAPH 3

Watford prime rental forecasts

 
Graph 3

Source: Savills Research

TABLE 1

Savills M25 market area

 
Map 1

Source: Savills Research

 
 

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Key contacts

Simon Preece

Simon Preece

Research Analyst
Commercial Research

Savills Margaret Street

+44 (0) 20 7409 8768

 

Steven Lang

Steven Lang

Director
Commercial Research

Savills Margaret Street

+44 (0) 20 7409 8738