Croydon offices: Old timers mix with new blood

Activity in the Croydon office market has accelerated over the last few months, with the increased uptake of accommodation reducing availability to just 5% of total stock.

There have been a number of large lettings to tenants who are already resident in the town, such as the Home Office Immigration and Nationality Directorate, which has taken a large proportion of the available accommodation, mostly in the Wellesley Road area, close to its existing offices.

New occupiers have also come to Croydon: Carillion has taken 2,790 sq m (30,000 sq ft) in Centre Tower, and Merrill Lynch has highlighted the demand, taking 6,040 sq m (65,000 sq ft) in the Lansdowne Building. As a result, the market has experienced rent growth.

At 96 George Street, initial lettings took place at £150.70/sq m (£14/sq ft), however, more recent deals have been as high as £172.22/sq m (£16/sq ft). Similarly, the £153.39/sq m (£14.25/sq ft) letting to Kynetix at AMP House, Dingwall Road, reflected an increase of £24.22/sq m (£2.25/sq ft) on previous lettings.

Secondary refurbished accommodation has also seen rent increases and improvements in lease terms. At the 1960s Green Dragon House, 64-70 High Street, Croydon, initial lettings were roughly £86.11/sq m (£8/sq ft) – now £107.64/ sq m (£10/sq ft) is being achieved.

Total office take-up this year has been 40,000 sq m (430,000 sq ft), the best year recorded in Croydon's history, and another 14,000 sq m (150,000 sq ft) could be completed before the end of the year. There is an increase in demand, with many companies struggling to find grade A offices that match their requirements.

Although several significant office buildings will come to the market during the next year to eighteen months, it is likely that the vacancy rate will continue to fall during 2001.

In the Bromley and Sutton office markets, conditions are similar, with a limited amount of stock available. This is being caused by the recent take-up of accommodation and lack of new developments to satisfy demand.

I predict…
A number of new developments will begin construction in 2001. There will be a significant improvement in rents for the best new buildings from £205/sq m (£19/sq ft) to around £237-£248/sq m (£22-£23/sq ft).

Yields are hard to determine – given a lack of recent sales – but would probably be around 7.5-8% and are likely to maintain a similar level thanks to rent value growth.