The way in which working from offices has evolved following the pandemic is widely talked about, whether in the press or between colleagues, friends and family.
The difference in opinion about the future of the office can vary hugely dependent on the sector, size and culture of the business that you work for. The impact on the office sector has been profound but as the dust starts to settle, we have reviewed what we have been witnessing within the local office market and also look to the future.
Lambert Smith Hampton is an established market leader within the office sector in Milton Keynes and the wider region. Our dataset of the office market offers a valuable insight into past performance and current trends.
In historical context, there is far less supply of office space within Milton Keynes than there was in the aftermath of global financial crisis. Today in MK there is approximately 750,000 square feet of available office space in comparison with 1.25m square feet in 2010. The reduction in this available supply has been driven by the conversion of tertiary office buildings to residential accommodation and a lack of new development.
Moves by businesses to consolidate their offices have not simply been down to cost cutting, but rather to exchange quantity for quality. In both 2020 and 2021, close to two thirds of take-up across the 25 South East markets involved Grade A space, the highest share seen at any point over the past 15 years.
In light of office occupiers demanding better quality office space, a real issue for MK has been a consistent lack of Grade A supply (either new build or comprehensively refurbished), with this classification of offices accounting for only around 20% of current availability. This is in stark contrast to the majority of other South East markets, most of which are in the region of 50% Grade A supply.
Newly delivered schemes in CMK have recently boosted the Grade A availability, including Santander’s Unity Place, where around 65,000 square feet is available to let; and The Avebury, a newly refurbished building of 33,000 square feet. Without new Grade A office stock, of which there is still an acute shortage, it detracts from the city as an office location for inward investment and facilitating the growth of existing occupiers.
Second hand office space which has not been refurbished will struggle to let, as we expect a continued flight to quality from occupiers looking to entice staff back into the workplace and meet ESG goals. Buildings that are unable to be repositioned and achieve necessary ESG hurdles, including the Minimum Energy Efficiency Standards (MEES), will face obsolescence more rapidly than previously envisaged.
The demand for offices during the past three years has been volatile but it is showing signs of recovery, with the supply and demand in relatively good balance in comparison with other South East markets. During 2021, take up (the amount of office space leased or sold for occupation) was down by around 37% on the 10- year average of around 250,000 square feet. There was a resurgence of activity in 2022 with an increase in volume of smaller transactions and a number of larger lettings resulting in take up almost equalling the long term average at around 247,000 square feet.
2023 has also had an encouraging start with 122,000 square feet of take up within the first quarter alone. 65,000 square feet of this was accounted for in a single transaction to x+why, a serviced office operator, who have signed an agreement on a floor in Unity Place. The shift from occupiers seeking flexible, fully fitted space has seen other operators open centres to meet this demand, including Cubix and Co-Space.
LSH advised on over 100,000 square feet of office transactions within MK during 2022, with highlights including 22,379 square feet let to Policy Expert at Exchange House, 14,228 square feet let to Kuehne & Nagel at Kents Hill Business Park, and 9,249 square feet let to 505 Games at Ashton House.
We are well placed to advise both landlords and occupiers on the challenges they face with core service offerings from the MK office including office advisory, industrial and logistics, building consultancy, lease advisory, valuation and property management.