Occupational Overview

There's a critical mass of local occupiers in Croydon who are loyal to the town. The discounted rents and fast transport links to Central London has also attracted footloose occupiers.

Occupational demand remained strong in Croydon in 2018 with take-up reaching 126,000 sq ft. This was over double the take-up in 2017. There have been no lettings above 5,000 sq ft in Q1 2019. There were strong levels of demand for Grade A space in Croydon in 2018 with both Interchange and Renaissance now fully let. Clarion Housing and Markel leased the remaining available space at Interchange totalling a combined 48,000 sq ft. These were the only new speculative developments delivered to the market in the last 10 years.

Another notable deal in 2018 was Green Network Energy who leased 29,000 sq ft at Renaissance, they relocated from St Paul's in the City, which is a theme that has continued from previous years. EDF Energy (Victoria) and Selection Services are other occupiers who have relocated from Central London to open a new office in Croydon.

The spike in take-up in 2016 was caused by the HMRC leasing 185,000 sq ft at Ruskin Square.

Croydon is undergoing extensive regeneration and the town centre is evolving into an amenity-rich location. In the last 10 years, 6,660 new residential units have been delivered with a further 5,201 units in the pipeline for the next five years. Croydon has the fourth average lowest house price when compared to other London boroughs. Furthermore, Westfield and Hammerson are planning to deliver a new 1.5 million sq ft retail and leisure centre which is set to begin construction next year.

Prime rents in Croydon currently stand at £34.00 per sq ft achieved at Renaissance. We expect prime rents to remain relatively static in the short term as there is no Grade A space available.

The development pipeline is limited with 28 Dingwall Road the only scheme currently being redeveloped which will achieve practical completion in 2020 and will comprise 40,000 sq ft.

INVESTMENT OVERVIEW

There have been no investment deals in Q1 19. There were two office buildings traded in Croydon in 2018 totalling £29.34 million. The largest deal was Rockspring Investment Managers buying Mott MacDonald House for £23.18 million, which reflected a yield of 5.45%. The building comprises 64,000 sq ft and is fully let to Mott MacDonald.

Croydon is an appealing market to investors as there are numerous asset management opportunities to implement on existing secondary quality stock. Furthermore, the market is experiencing a repricing with prime rents increasing by 45% in the last five years from £23.50 per sq ft to £34.00 per sq ft.

What to expect from Croydon in 2019?

1. The lack of available Grade A supply will impact on take-up volumes in 2019, therefore we expect weaker take-up when compared to 2018. There is, however, a good quantity of Grade B space available which caters for demand from smaller and local occupiers who are predominantly seeking below 10,000 sq ft.
2. There could be further relocations from Central London mainly occupiers based near London Bridge and Victoria who are attracted by the discounted office rents available and the short train journey to East Croydon.
3. The bulk of demand in 2019 is expected to originate from the existing base of professional and financial services occupiers based in Croydon.
4. We expect a new rental tone for Croydon will be set at 28 Dingwall Road where Mayfair Capital are redeveloping the existing building. It is anticipated that the majority of the building will be let prior to practical completion at rents in the mid to high £30s.
5. Ruskin Square is the only scheme in the town which can deliver a speculative development of any quantum in the short term. Stanhope and Schroders have planning permission for a further 1 million sq ft.