Despite the continuing view that activities are focusing on
urban centres, a stable base of tenants still requires such
locations. While low prices and considerable potential for
refurbishment means the prime end of the sector has much to offer
investors, according to the latest report from Strutt & Parker
and IPD. The S&P Business Parks Index said that almost
5.17 million square foot was needed in the South East alone, and
that with speculative developments non-existent demand will fall on
"A unique kind of tenant wants to utilise business parks,"
explained Stephanie McMahon, Head of Research at Strutt &
Parker, "and these have not gone away - hence there is still
healthy demand for space in parks with good access, modern
facilities, and adaptability - basically, prime stock.
"Income returns for business parks have been resilient over the
last five and ten years, and we expect that to continue - and at a
more stable rate than offices in general in the UK, which have a
considerable proportion of top slice income set to expire."
Yields on the parks were up to 8.0 per cent by the middle of
this year, compared to 4.6 per cent for Central London offices.
Vacancy rates are some of the lowest in of any office segment or
area, and only in the North of England are they higher than other
Rental value growth, an indicator of tenant demand, continued to
grow last year, by 0.4 per cent, and S&P parks were the only
office type outside of London to see rental value growth.
Victoria Mejevitch, Head of IPD occupiers, explained the demand
from tenants: "One of the most important requirements for large
office occupiers is adaptability of space - they prize being able
to change large, open plan offices to their own requirements.
"Business parks are well suited to provide this adaptability.
Furthermore, though a number are in need of refurbishment, this
provides an opportunity for investors to adapt these spaces to the
needs of 21st century tenants, providing the next generation of
working environments for occupiers."
View a summary of the Strutt
& Parker/ IPD Business Parks index.
Download the Strutt
& Parker/ IPD Business Parks index data.
Read the full Strutt &
Parker/ IPD Business Parks Index.