The Thames Valley – The Changing Face of the UK’s Tech Corridor
The Thames Valley has a long-established reputation as the UK’s ‘Silicon Valley’. Technology booms in the late 1980s (computers and telecoms) and late 1990s (software and internet) led to a wave of new occupiers moving to the region.
In the late 1980s American and Japanese technology companies wanted to establish bases in the UK, as the gateway to Europe. They needed to be close to Heathrow so that their executives could visit easily, and they needed business parks which offered flexibility where they could both establish a small base and expand significantly over time. In the late 1990s Cisco, who dominated both Stockley Park to the north of Heathrow and Bedfont Lakes to the south, envisaged occupying all of the 1.6 million square feet at Reading’s Green Park, however the tech-bubble burst in 2001 and so they only committed to 580,000 sq ft and actually only ever occupied 238,000 sq ft.
Times - They’ve Changed
The Thames Valley now has a very mixed occupier profile with no single sector dominating, and continues to be a powerful driver of growth within the south east and the UK as a whole.
Some parts of the Thames Valley are particularly robust. Reading’s diverse office market of 12 million sq ft has seen more leasing activity than any other market during the first half of 2019, spread across both its town centre and outlying business parks.
This activity is a result of the regeneration of the town centre, particularly the significant investment into the rail station - with more commuters now happy to rely on public transport, rather than be exposed to the traffic congestion that once held the office market back. The long-established HQs of Cisco, Oracle and Microsoft continue to act as ‘anchors’ to technology businesses at different stages of their development cycle.
There is speculative development taking place at Reading’s Green Park in the form of two buildings totalling 230,000 sq ft. Occupier demand makes the decision easy to make. What is more challenging are the costs of construction which have outstripped inflation.
Attracting diverse talent
Companies are driven by the need to attract and retain a diverse workforce, with access to the widest possible skills-pool. This access is most readily available within central London. While young people in particular may not be able to afford to live in central London, they do, however, want access to its social life so are more likely to live in the Home Counties and commute in, thereby providing a ready-made talent pool on the Thames Valley’s doorstep.
Employers are making the most of this availability, and generally seek to attract staff by creating a different environment to the traditional office. There are generous break out areas, terraces for socialising, on site cafes and luxurious showers which might be used by the cyclists in the morning and staff going out after work in the evening.
Added to this, many town centres in the Thames Valley have had a resurgence as Local Authorities have heavily invested in the built environment, public realm and public transport. This has also coincided with young workers no longer relying on their cars and being happy to work in the town centre.
The occupier profile in the Thames Valley may have become more sector-diverse, however the benefits of first class public transport permitting access to an educated and professional workforce and a stock of modern, high quality office buildings in both the town centres and business parks will continue to tick all occupiers’ boxes.
Whilst the Thames Valley still offers a significant financial discount to occupying offices in central London, occupational costs even in central London are proportionally a great deal lower in relation to total business costs than they were in the late 1980s or even 1990s. Offices are also relatively more affordable because occupiers use the space more efficiently; they now might occupy some areas at 1 person to 8 sq m rather than the 1 to15 sq m that they may have used in the past. Nevertheless with prime rents at under £40.00 per sq ft the best space in the Thames Valley is comparatively good value.
Over the last few years the likes of Google, Facebook, Apple, Spotify and LinkedIn have all committed to space in central London rather than the M4 corridor, often in new submarkets such as White City, Stratford, Kings Cross and Battersea which are able to accommodate the required scale.
Where next?
Trust Elizabeth – most commentators on the Thames Valley office market have high hopes for the Elizabeth Line as it will provide a fast, comfortable and cost effective service straight into central London. We expect a further boost to the established markets, such as Reading, Maidenhead and Slough, but also the less high-profile locations such as Langley, West Drayton and Hayes, whose office markets have lost out to the former markets but will in the future offer better value.
