Mind the Gap…in Grade A

After a strong year for take up, particularly at the top end, prime space has tightened noticeably. The best buildings have been absorbed quickly. This reinforces Reading’s role as the commercial centre of the Thames Valley but it also highlights a growing imbalance, there is a demand for quality however supply at the very top is thinning out.

The shift didn’t happen overnight. Covid accelerated what was already underway. Lower-quality stock fell away rapidly, with much of it exiting the office market altogether through residential conversion and so what is left is a market that has reset itself around quality.

Many occupiers are no longer willing to compromise on specification, sustainability and most importantly location. The office has become even more of a strategic tool for attracting talent, supporting collaboration and reinforcing company culture.

Over the past five years since the end of the pandemic prime space has led with flagship schemes at One Station Hill and Green Park seeing consistent demand and outperforming their competition with occupiers upgrading into the strongest buildings available in the best locations. These schemes will continue to perform at the top of their market and where new prime schemes are delivered in these locations they will meet success. However, availability is tightening and the market cannot rely on prime space alone.

If prime is limited, what’s next?

With prime options diminishing, buildings capable of meeting Grade A expectations in the right locations and with the right level of investment will attract occupiers who are not seeking space at the very highest price.

These are not secondary assets in the traditional sense. Many are well located, structurally sound buildings held back only by outdated specifications. With refurbishment and repositioning, they can meet and potentially in some cases rival, today’s prime standards.

Across the town centre, around the station and within established out of town parks, there is a clear opportunity to reposition stock into the space the market now lacks; high-quality, ESG aligned, occupier ready offices delivered far quicker than new build can achieve.

Grade A refurbishment has become the most practical route to maintaining momentum and Reading has already shown that this approach works.

Campbell Gordon’s advice to landlords and investors would be to not wait for development economics to improve for the next wave of success in Reading’s office market but to recognise that the market has already shifted and identify the right opportunities with great fundamentals. The buildings that succeed will be those ready to meet occupier expectations now not in three years’ time. Contact the team here at Campbell Gordon to hear more.