Office Performance

Despite a minor improvement in occupier demand in the south east region over the past 12 months, demand within the county has been very subdued. The over supply of secondary stock in the majority of key commercial locations has resulted in rental levels dropping by 2% to an average of £135 per sqm (£12.54 per sqft) from the £138 per sqm (£12.82 per sqft) seen last year. Rental growth remains negative at -5.7%, the lowest for 17 years, but is still above the south eastern average of -6.5%, released by Investment Property Databank (IPD) index.

The polarisation of demand between the west and the east of the county remains, with the majority of significant deals limited to established business locations. Turkey Mill, Maidstone has seen occupancy rates reach 95% with over 14 deals in the last 12 months, with new lettings and relocations comprising 20% of the business park's 9,290sqm (100,000sqft). Following this continuing success, Turkey Mill Investments has planning permission to build a further 1,375sqm (14,800sqft) detached building. Designed by Kent based award winning architects, Guy Hollaway, Paul Sandby Court will provide a combination of up to eight Grade A individual office suites set around a feature man-made 'babbling brook' water course.

Elsewhere, construction of two new speculative offices, one of only a handful this year, at Gallagher's Hermitage Court, Maidstone are due to be completed at the end of 2012. A pre-let has already been agreed on the 492sqm (5,300sqft) Unit H to a single international occupier for a 10 year term at £204.50 per sqm (£19 per sqft); with Unit G-483sqm (5,200sqft) also part let. In Sevenoaks, a letting at BT's 160 London Road to Siemens saw 888sqm (9,558sqft) taken at a rent of £167,256pa on a 10 year lease. This letting represents some retained demand for larger transactions, albeit one of a minority to take place this year.

To the east of the county, at Cantium Development's Watermark, Sittingbourne, only a single unit remains. However, in the wake of waning occupier demand planning permission has been secured for the change of use of the remainder of the site to 300 residential units.

Whilst the lettings market remains subdued, investment has seen a slight resurgence in some key towns. In Canterbury, 1,394sqm (15,000sqft) of space at Beer Cart Lane and Stour Street is under offer following a change in marketing strategy from leasehold to freehold 12 months prior. Elsewhere, to the south of the town, the former Adscene premises, News Paper House, has sold to a church group.

A flurry of investment deals in the south east has resulted in yields stabilising at 6%. However, within Kent the lack of quality supply has continued to result in a limited number of investment deals completing, with availability predominantly made up of secondary and tertiary stock. This is of limited interest to investors and subsequently yields continue to rise. The multi-let, 1,227sqm (13,210sqft) Orchard House, Canterbury sold at the beginning of the year for £1.3m, representing a net initial yield of 10.1%.

Lettings

Location	Landlord	Tenant	Size sqft	Rent (pa)	Lease Term	Agent
2nd Floor, 160 London Road, Sevenoaks	BT	Siemens	9,558	£167,265	10 year with break at year 5	Altus Edwin Hill
Longford House, Mount Ephraim Road, Tunbridge Wells	Sion Holdings Ltd	Focus Vision	4,365	£69,840	5 year with break at year 3	Durlings
25-26 Turkey Court, Turkey Mill, Maidstone	Turkey Mill Investments	PFPR Communications	3,984	£77,000	10 year with break at year 5	Watson Day Martine Waghorn
4th Floor, Joynes House, New Road, Gravesend	c/o Cedar Harp	Klarity Vision	3,715	£23,776	10 year with break at year 5	Caxtons
23-24 Turkey Court, Turkey Mill, Maidstone	Turkey Mill Investments	Kent Music	2,636	£42,500	10 year	Watson Day Martine Waghorn
LGF Enterprise House, Essex Road, Dartford	Texcel Developments	Pilgrim Petcare	2,500	£32,500	15 year	Glenny LLP
1st Floor Kestrel House, Knightrider Street, Maidstone	Milroy Developments	Liverpool Victoria Friendly Society	2,116	£35,972	10 year with break at year 5	Altus Edwin Hill

Sales

Location	Vendor	Purchaser	Size sqft	Tenant	Price	Income	Yield	Agent
Orchard House, Orchard Street, Canterbury	Merchant Navy Pension Fund	Private individual	13,210	Various including Pitman Training, Zibrant Ltd, Co-Op Insurance Services	£1.3m	£138,810	10.1	BTF Partnership
Clockhouse Court, Bessels Green, Sevenoaks	Ascom Plc / Nutbury Ltd	Bishops UK Ltd	7,137	Vacant	£1.7m	-	-	Durlings
The Old School House, Tonbridge	Private Investor	Private Individual	2,500	Vacant	£520,000	-	-	Broadlands Commercial Property Agents LLP
1 Craddock Road, Canterbury	Chaucer Homecare Ltd	Private company	1,650	Vacant	£285,000	-	-	Caxtons