Source: Savills Research
Speculative development returns to the Watford office market after a ten year absence
■ The Watford office market is currently experiencing a period of rejuvenated confidence. Take-up for 2016 alone is already 104,678 sq ft, which is already a 40% increase on 2015's total take-up. Following the largest letting in Watford for 15 years to Smith & Nephew, who leased 60,000 sq ft at Croxley Green Business Park, Threadneedle have announced that they are speculatively developing a new 60,000 sq ft building at Croxley Green Business Park. This will be the first speculative development in the Watford office market since 2006, highlighting the current developer confidence in the market.
.png)
GRAPH 1Take-up by grade
■ Watford has always been a core market in the South East office market, however, the lack of Grade A available stock has hampered take-up in recent years. However, there is clear demand for office space which has been underlined by several corporates making a commitment to Watford in recent years. Most notably TK Maxx who bought a residential site on Clarendon Road in 2015, with a view of developing in excess of 100,000 sq ft. Other occupiers based in the area include Wickes, KPMG, JD Wetherspoon and Hilton.
.png)
GRAPH 2Availability by grade
Source: Savills Research
■ There is currently 199,837 sq ft of office space available and 64,856 sq ft is of a Grade A quality. There are only four buildings where Grade A space is available, two of these are on Croxley Green Business Park, which is out-of-town and two current refurbishments in town at 45 Clarendon Road (16,122 sq ft) and The Junction (47,230 sq ft). We expect this Grade A supply to further decrease as there is strong occupier demand for Grade A space in the Watford market. Most notably at 45 Clarendon Road where 11,000 sq ft was recently let to VWV at £27.50 per sq ft, which was the highest rent achieved in the last 15 years. Rents for Grade A, new build offices on Clarendon Road would be £30 per sq ft should a building be available today.
.png)
GRAPH 3Watford prime rental forecasts
Source: Savills Research
■ Since 2015, there have been 2.32 million sq ft of office requirements for the northern sector in the South East office market. Watford has been unable to capitalise on this demand due to the lack of new development in the town. Given the excellent transport links that Watford possesses, 16 minutes by train to central London, Watford would be able to capitalise on this demand if new developments were available today.
■ A major attraction to Watford compared to other core markets in the South East is its affordability. Watford is undervalued compared to other surrounding M25 towns such as Uxbridge (£34 per sq ft) and St Albans (£28.50 per sq ft) with Grade A refurbished stock transacting at £25 – £26 per sq ft. With a roll call of UK, national and international companies based in Watford, should a built scheme be available today it would "let up" quickly on terms producing a new record rent for the town.
.png)
TABLE 1Savills M25 market area
Source: Savills Research