June 2017 - Costar
McKay Securities, the UK REIT specialising exclusively in the London and South East office and industrial markets, has let the whole of 9 Greyfriars Road, its speculative 39,620 sqft office development in Reading, to IWG’s (formerly Regus) creative workspace arm Spaces.
Spaces has agreed a 15 year lease term, with a tenant break option after 10 years, at a rent 3.3% ahead of March 2017 ERV. 9 Greyfriars Road will represent Spaces’ eighth location in the UK, and its first in Reading, since entering the UK market in 2015.
Market sources suggested it is paying around £31 per sq ft.
The letting is understood to be the largest in Reading town centre for five years apart from SSE’s major HQ letting at M&G and Bell Hammer’s Forbury Place in 2015.
McKay acquired the vacant 9 Greyfriars Road off market in 2014, with the objective of carrying out a refurbishment to reposition and upgrade the building to modern standards.
McKay said that on completion, the scheme achieved the first BREEAM “Outstanding” rating to be awarded to an office building outside London and an EPC A score for its sustainable design, ensuring running costs are kept to a minimum.
Simon Perkins, chief executive of McKay, said: “Selection of 9 Greyfriars Road by the growing brand, Spaces, provides a strong endorsement of the occupier-focused business space we have created and that we continue to deliver across our growing South East office portfolio. The letting reaffirms our long-term conviction in the strength of the Reading office market and once again demonstrates our ability to meet occupier requirements and add value from comprehensive refurbishment and development projects.
“9 Greyfriars Road was purchased off market with proceeds from our £86.7m Capital Raising in 2014. The back to frame refurbishment has transformed it from an obsolete edifice to an award-winning investment with the highest sustainability credentials, fully realising its potential. Our team has exceeded itself, and played an important role in the generation of shareholder value.
“This lease to Spaces releases 20% of our development void reversion and reduces our letting exposure. It also crystallises a significant proportion of the £9.26m pa reversion that we have strategically built up within our portfolio and will add to the 43% increase in contracted rents and a 69% increase in portfolio value that we have already achieved since our 2014 Capital Raising.”
Richard Morris, UK CEO, Spaces said: “The opening of a new Spaces location in Reading is an exciting addition of our existing portfolio in the UK and globally. We see an increasing demand and interest for community based working and co-working in Reading and we strongly believe that the market is open to receive what we have to offer and that our brand really fits here.
“Spaces gives members the opportunity to meet like-minded people who believe in taking their careers into their own hands. Our locations and events enable them to get involved in this way of life.”
Strutt & Parker and Campbell Gordon acted on behalf of McKay.