Spotlight: Reading

Reading
 
Primed for city status

28 September 2017, by Savills Research

Reading may be meeting its current targets, but it must develop more living and office space in and around the town centre to meet its potential as a city

 

On the face of it, Reading is achieving its housing targets. In the year to March 2016, 750 homes were added, up from 264 and 360 in the two previous years and above the town’s target estimate of 699. But with strong and growing employment, our research suggests that Reading needs many more than this target to reach its full potential as a city.

In the past few years, delivery has been boosted by office to residential conversions in the town centre. In the year to March 2016, 254 homes had been converted from offices, providing 34% of new supply.

The strength of office to residential conversion is a good indicator of rental demand for inner city stock, as much of this enters the buy-to-let market. However, office space for conversion is a finite resource and cannot be relied on for sustainable levels of new supply.

Central Reading revitalised

Many new homes built in the last three years have been in the town centre, evidence of the revitalisation of this part of Reading. Here, recent sales have exceeded £500psf, much higher than the average of £385psf. Compared with London, £500psf is relatively affordable and sits in the mainstream part of the market, where there is a severe supply demand imbalance in the capital. The result is that locals are competing for housing with large numbers of people who commute to the capital.

Office supply needs to expand

There is clear demand for new office stock in the town centre, highlighted by interest in Thames Tower, R+ and The White Building.

A total of 110,000 sq ft had been let at these three new buildings by the end of the first half of 2017. Strong demand for new, high-quality office space in the town centre has resulted in record rents. The letting performance of this new stock is encouraging and we forecast rents to reach £40psf by 2020.

FIGURE 3

Prime rental office outlook Strong demand for new, high-quality office space in Reading town centre has resulted in record rents. We forecast these to reach £40psf by 2020

 
Figure 3

Source: Savills Research

For Reading to cement its status as the leading office market in the south east and be recognised as a regional city, more development in the town centre will be needed.

Our analysis indicates a shortage of town centre office space by 2019. As such, Reading may not be able to satisfy large requirements in the Thames Valley. Occupiers here are more footloose than in other office markets and they will move if they can’t satisfy their requirements in one market.

For Reading to capitalise on demand from central London, it is crucial there is high-quality stock available in the town centre. It is unlikely central London occupiers will consider out-of-town locations.

FIGURE 4

Residential supply Many of the new homes built in Reading in the last three years have been in the city centre, evidence of the revitalisation of this part of Reading

 
Figure 4

Source: Savills Research using Land Registry

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Key Contacts

Steven Lang

Steven Lang

Director
Commercial Research

Savills Margaret Street

+44 (0) 20 7409 8738

 

Jacqui Daly

Jacqui Daly

Director
Residential Research

Savills Margaret Street

+44 (0) 20 7016 3779