THE WORLD’S BUSIEST AIRPORT?
As a major source of business generation for the UK, a flourishing office market has developed around Heathrow. Growth of the airport is reaching the final stages of approval, with the final parliamentary decision on a third runway expected in 2018 - yet still is in flux.
If approved, passenger numbers will rise from 78 million to 130 million per year, making Heathrow the busiest airport in the world. Served by rail, underground and major road routes, connectivity is already a major business attraction.
This will be bolstered by connections to the Elizabeth Line in 2019. In addition, consultation for the Western Rail Approach to Heathrow is ongoing. The link to the Great Western Mainline would increase rail traffic to and from Reading and the West of England. Works are expected to complete in 2024, if approved.
BUSINESS PARK REFURBS
With a total built office stock of over 10m sq ft, Hillingdon, inclusive of Heathrow, accounts for 15% of the built stock in the M4 corridor. Significantly, approximately, two thirds of this office stock is business park space.
Stockley Park and Bedfont Lakes are the dominant parks close to Heathrow, with the former being the longest established business park in the Thames Valley at 32 years old.
Recent development work has centred on these schemes, with 336,500 sq ft of major refurbishment projects completed over the past 24 months. Additionally, LLF Real Estate completed speculative works on the 84,000 sq ft Heathrow Approach and Arora Group have built the 85,000 sq ft 4 World Business Centre to accommodate a pre-let to tech firm Amadeus.
FLEXIBLE CORPORATE SPACE
Heathrow is home to several large corporate occupiers. Unsurprisingly, the aviation industry has a strong presence, with British Airways and BAA having an HQ on the Bath Road.
The technology sector, however, has been the dominant source of new demand over the past 10 years, accounting for 32% of take-up. Global names such as Cisco, IBM, and Rackspace sit alongside pharma occupiers such as Gilead, Celgene, GSK, and Merck.
Although not yet a stampede, flexible office providers have begun to influence the Heathrow market. IWG / Regus have two facilities on Stockley Park and other providers are expected to follow and take advantage of the strong corporate presence.
KNIGHT FRANK VIEW
Heathrow will remain a key hub due to its status as a major centre for international corporate businesses, although the third runway construction works may lead to some short term pain.
The serviced and co-working offering must become increasingly sophisticated and grow in order to take advantage of the major corporate occupier presence around Heathrow. This occupational drive toward greater flexibility and amenity is filtering into the business park model where we are already seeing Stockley Park and Bedfont Lakes become more service orientated.
Rental growth has been significant in Heathrow over the last five years, with prime headline rents moving up from £29.50 to the mid £30’s, an increase of 27%. Our forecasts indicate that growth will be sustained, with an increase to £39.00 per sq ft anticipated by 2021.