Investment frenzy pumps up Reading property market

Emanuele Midolo

Source: Andy Stagg

When it comes to office stock, Reading punches above its weight. It has some 10m sq ft of office space - roughly the same amount as Leeds. The difference is that Reading is a town with a population of 230,000, while Leeds is a city of more than 700,000.

This is one reason Reading’s property market is one of the UK’s most active.

“Reading has truly established itself as the ‘capital’ of the Thames Valley,” says Jonathan Webb, partner at Hanover Green. “Institutional investors are very keen to invest in the town and to benefit from continual rental growth and future infrastructure connections.”

At odds with buoyant investor interest in Reading, office take-up in Berkshire as a whole (including Reading) was disappointing in 2016.

And overall, the South East office investment market was slow during the first half of this year - data from Gerald Eve shows that in Q2, deal volumes totalled just £451m, making it the weakest quarter in the past five years.

Busy summer

However, Gerald Eve predicts the figures will pick up considerably in the second half of the year. This has certainly been the case in Reading, where an unusually busy summer - some of the most recognisable buildings in the town centre were sold between July and September - has boosted investment volumes.

Last month, The Blade - Reading’s tallest building at 14 storeys high - was acquired by Northwood Investors from Aviva Investors for £40m. The 110,000 sq ft skyscraper achieved one of the town’s highest rents last year when law firm Gateley took the top floor at £34/sq ft.

Aviva also sold its Abbey Gate office scheme to Longmead Capital for £14.8m, while neighbouring offices Phoenix House and the Pinnacle have been sold to Fidelity UK Real Estate and Standard Life Investments for £20.5m and £13.5m respectively.

Also in September, Singapore-listed real estate investor Frasers Property International bought Oaktree’s business parks portfolio, including Winnersh Triangle, which is located just outside Reading and is worth £365m.

Finally, Standard Life is under offer to buy another town centre office, Forbury Works, from Boultbee Brooks for around £12m. The building sits opposite the new Reading station and spans 23,000 sq ft.

Investment boost

All these deals have pushed investment volumes in Reading up to more than £500m.

“Over the course of 2017, we’ve seen a significant volume of investment deals taking place in and around Reading, reflecting investors’ appetite to buy prime real estate in this location,” says Webb.

What’s more, Reading is soon to get an additional 500,000 sq ft of new office stock. Four speculative developments are complete or are due to complete within the next few months: M&G Real Estate’s 2 Forbury Place and R+; Boultbee Brooks’ White Building; and Thames Tower, which has been developed by a JV between Landid and Brockton Capital.

Agents agree that this spending frenzy is in preparation for the December 2019 opening of the final section of the Elizabeth Line, which will reduce journey times between Reading and Bond Street to less than an hour.

Thanks to Crossrail, office rents have increased in all 11 Thames Valley towns in the past two years and all expectations are that they will continue to rise. As the region’s ‘capital’, Reading is likely to go from strength to strength.

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