Vacancy rates in the main office centres of Bromley, Sevenoaks and Maidstone  stand  below 5% with no new stock coming to the market.  There is availability of Grade B second hand space with over 100,000 sqft in Bromley, 150,000 sqft Maidstone  and 40,000 sqft in Sevenoaks – according to recent research produced by Knight Frank.  This may sound enough when take up is at an historically low level and the strongest demand is at the smaller end of the market but occupiers do actually have limited choice when exact location, specification, size and space configuration  considerations  are all taken into account.  Within the Kent sector of the M25 it is only Crossways Dartford that is offering new grade A space.  Crossways Point comprises two new offices of 16,700 sqft and 24,600 sqft.  Practical completion took place this summer and 12,200 sqft has been let so far.  The in going tenant is Balfour Beatty showing the construction sector may have some life in it yet.

John Wilkins advised Kier in respect of their acquisition of Royal Court, Bromley which Kier took occupation of in May after a comprehensive refurbishment to bring the building up to a modern corporate occupier standard.  Royal Court is approx 23,000 sqft  and was selected by Kier because of its prominent position,  convenient access and proximity to Bromley South Station and although the building is nearly 20 years old it was capable of a high quality refurbishment which Kier were able to project manage themselves.

Although there is downward pressure on office rents across the SE sector, rents are proving more resilient than the Thames Valley where quoting terms have been reduced spectacularly to generate interest.  The headline rent paid by Balfour Beatty has been rumoured to be £23.50 psf which shows no decline from lettings in West Kent pre Lehman Bros.

Investor interest in the sector appears to be returning.  In Croydon, where vacancy rates have edged over 6%, Metro Point, the 40,500 sqft building completed in 2002 and let to Dept of Transport has been purchased by overseas investors for £12m, representing a yield of 7.25%.

The firm is currently providing development advice in North-Kent and Mid-Kent and is assisting owner occupiers assess the long term investment potential of freehold and long leasehold commercial property in Kent and SE Sector of the M25.

Wilkins Green is regulated by the RICS. 

The big movers in the Kent Industrial and Warehouse markets have been Aldi, the discount supermarket, who are due to start on a 560,000 sq ft major distribution centre at Queenborough this October. Distributor CKR have taken 67,000 sq ft at Crossways’ Cargo Centre and KCC are attempting to breathe life into Manston, where there is 77 acres allocated for a new business park. The hope is that Chinamex will create a hub to showcase Chinese industry in the UK and share technology and working practices.

Most of the activity remains in the sub-10,000 sq ft category where hard fought over deals are still being done although levels of activity are well below their peak in 2006.

However, although it is fair to say demand is at allow ebb, there is limited choice for occupiers seeking prime space and tenants expecting a marked drop in quoting terms have been disappointed. At Crossways Business Park, Dartford, there are two new office schemes offering a total of approximately 80,000 sq ft. The guide rent quoted by developers Frogmore and Shepherd Developments and Durngate is £25 per sq ft – in line with rental expectations before the credit crunch began. Unlike the Thames Valley, Kent has not seen high levels of speculative development. Supply of new build is limited but so too is demand and there will be some hard negotiations before the 1^st tenant is signed up.

At rival business park, Kings Hill, West Malling, there has been no recent speculative development.

Large occupiers are in short supply, so who’s in the market?

Balfour Beatty, Kuehne & Nagel, Saga and Medway Primary Care Trust are in the market for office space in Kent and there remains the possibility of Kent persuading a large requirement to migrate around the M25 from Surrey. For example, World Wildlife Fund, The Environment Agency and hedge fund Man Group are thought to be focusing their attention on the southern sector of the M25.

Jones Lang LaSalle have indicated, in a recent report, that investment yields may be hardening for the first time since 2007. Prime City office yields have moved in from 6.5% to 6.25%, since the end of May.

However, the same cannot be said for investment yields in the secondary office sector where demand for stock that may require active asset management has eased off and prices have weakened. Yields in the industrial sector appear to have stabilised but confidence in the sector remains fragile while rental growth remains negative.

Independent Property Data and Strutt & Parker’s joint review found in 2008 just 24% of tenants exercised their break clauses, compared to 43% in 2007.

Landlords are doing their best to make existing tenants feel really welcome. When rental values are falling and rental voids are growing, the last thing a landlord wants is to lose a tenant. This gives rise to service charge shortfalls as well as empty rates liability. In some ways, the worst of it, from a landlord’s perspective, is the uncertainty of not knowing when the space will be reoccupied. Landlords are offering financial incentives not to exercise break clauses including:-

Reduced rents

Dilapidation deals

Refurbishment contributions; and

Capital payments

In over 75% of cases, landlords are succeeding in retaining their tenants but occupiers are making them have to work hard.