Market Insight

South East: Q1 Commercial Property Update

What are the latest developments in the south east commercial property market and what can we expect from the rest of 2024? Office and industrial agency partners, Charlie Nicholson and Steve Berrett, explore
March 13, 2024
A low angle view of a tall office building with clear skies and light reflecting off the glass

We have seen a much more positive and stabilising market develop in the south east after a tumultuous period of change, catalysed by the disastrous mini-Budget delivered by then-Chancellor, Kwasi Kwarteng, in September 2022.

Despite the economic challenges that remain, we do feel that there is a sense of opportunity in the air this year, both for the office and industrial market, as inflationary pressure subsides.

However, we would still urge clients to proceed with cautious optimism, because we are probably only halfway through the impact of interest rate rises on businesses.

What this means in practical terms, is that business leaders are making decisions after a period of inertia but are repricing due to that niggle of uncertainty that remains.

In spite of this, overall, we would say that business confidence is returning after the recent hiatus which saw commitment to any sort of capital expenditure become problematic – both for landlords and investors, as well as occupiers.

Thankfully, we are now seeing opportunities come on to the market, both in the office and industrial sectors, which is starting to create the momentum we hope to see continue in 2024.

What lies ahead for the rest of the year?

Despite the green shoots we mention above, there will be some tough property decisions this year.

Owner occupiers or investors may seek to rationalise their property holdings and potentially dispose of assets which are surplus to requirements.

Meanwhile office and industrial occupiers with lease events coming up in the next 18 months, may think about consolidating their space or locations, to meet their new workplace strategies.

This trend will continue for the foreseeable future, but it isn’t necessarily negative. It will see movement in the market, and will provide an opportunity repurpose secondary or older office stock across the south east.

This could be to residential use, or whatever is best for that particular area, but what this does is also deliver an opportunity to refurbish and create the right environment for businesses in the region.

Office occupiers continue to right-size their space requirements, which in many instances means downsizing due to hybrid working models.

However, because they are taking less space, there is more opportunity to take a better standard and quality of space.

In our experience, occupiers are not afraid to pay a higher premium on office space, to get the right quality and entice their workforces back to the workplace with a more exciting and collaborative place to work.

Flexibility will be key

This year, businesses will want flexibility, whether that’s with conventional office space or by moving into a flexible, serviced or co-working space.

As mentioned above, there is still a flight to quality, and ‘flex’ operators will need to balance the capital expenditure invested into making the office a fun, collaborative and interactive place to work, with the rents they can command, to make it stack up financially.

We are seeing several businesses move to a ‘core’ office and then take additional flex space. This is the ‘hub and spoke’ approach that we predicted would happen at the start of the pandemic, where businesses commit to a centralised hub in, say, London and ‘spokes’ out in the regions.

This is where locations such as the Thames Valley have really benefitted, where towns such as Reading and Bracknell, boasting good amenities as well as office space, have won out.

Decentralisation is also a theme which landlords and investors need to monitor, with both government departments and private businesses adopting this approach.

If you build or refurbish offices in the right location and to the right specification, occupiers will come.

This is what we have seen in places like Maidenhead, where the Elizabeth Line and its impact on east to west travel, has seen record rents be achieved – reaching the heady heights of £53.00 psf, from previous highs of just £39.00 psf.


of workers prefer to work in the office

£53.00 psf

Record rents in Maidenhead

Will 2024 be the year of the full-time return to the office?

The latest research shows that in 2023, four in ten employers returned to the office full-time, making it the year of the Great Office Return, with 52% of workers surveyed preferring to work in the office.

Businesses will likely drive a return to the office to one extent or another this year, if they haven’t already. Having said that, there is a widespread acceptance that more flexible, hybrid working is the norm.

The pandemic accelerated a process that had been happening for the past 15 years, and if you walked around any office building over the past decade, you would likely see few people, as most would be working from home.

Now, people can work from anywhere – a co-working serviced office, business lounges or even the gym – but it will ultimately come down to the individual approach of businesses, over the extent to which hybrid working will remain.

For employees, there should be no expectation, particularly on the back of a recent Employment Tribunal judgment involving the FCA, that they will be able to continue to work flexibly from home.

Whilst 12 or 18 months ago businesses didn’t really know what space they needed or what it looked like, now they are more clued up about what is it that they want and how many people are going to be in the office on any given day of the week.

This has seen many businesses return to the workplace, a trend which is expected to continue into 2024.

Businesses can no longer take it as read that they can be located exactly where they want to be. This means you need to cast your location net further.

Steve Berrett, Agency Partner, Vail Williams – Gatwick.
Steve Berrett headshot, Partner in Crawley in Crawley & Brighton for Vail Williams.

What should businesses think about when relocating?

So, when out looking for office or industrial space, we are seeing businesses have much more precise requirements.

As agents, this helps us because we are not starting conversations from scratch; companies now have some experience of post-pandemic working to back their thinking.

As a result, in those towns where it is cost effective and office rents are high, landlords are now looking to provide boutique hotel-style finishes with concierge service and all the bells and whistles such as amenities on site. This makes it exciting for staff to return to the office, which is now made up of a mixture of accommodation with that fit-out.

At the moment, across the south east, there is a complete lack of industrial stock. This means that business owners occupying industrial, warehouse or logistics space, need to think well in advance about their operational requirements and associated property needs.

They also need to be quite flexible in their thinking and geographic net. Not enough ‘sheds’ or industrial stock has been built over the last 15 years, and in some instances, we are seeing spec-built accommodation sold off plan.

Businesses can no longer take it as read that they can be located exactly where they want to be. This means you need to cast your location net further.

The pressures on land use across the south east is such that industrial still isn’t able to compete with other uses. Together with cost build inflation, whilst settling to a certain degree, we still aren’t seeing enough new stock being built here – even though we have a great deal of potential development land not being built out, not to mention the occupier demand clamouring for it.

In terms of offices, what is interesting is that, when business owners see lots of boards up around a town centre or business park it does not mean there is a great deal of choice. This is because they now have a good idea of the size bracket of office space they want to occupy and their own specific demands of the office environment. And, depending on the specific location, there is not actually that much Grade A, ready-to-go office stock as one might imagine.

Relationships still matter, but tech can help

Prop tech and artificial intelligence (AI) are terms which are very much en vogue at the moment, and we continue to develop our own systems and databases to ensure an efficient service founded in in-depth knowledge.

The types of proprietary databases that you can now get hold of are extremely efficient and useful, but you still can’t take away the human element of face-to-face meetings and knowing operationally what a business needs to do.

We have a strong database, we have access to lots of data sets, whether that be, say planning, the Land Registry or others. Our property portfolio asset management software is also a strong tool for us to use and particularly effective.

But it doesn’t take away the human side of property, which is understanding someone’s business and empathising with the needs and challenges associated with property and property decisions

It is therefore becoming increasingly important to take advice from property professionals who really know the market you are operating in, who can take advantage of off-market opportunities and protect your business interests.

Take advice, talk early and plan ahead.