The Jersey economy continues to perform well, annual GVA rate increased by 2% in 2015, unemployment rate was estimated to be around 4% in 2015. Q2 2016 showed a record number of people employed-60,320.
The occupier office market has been strong, around 82,000 sq ft has completed and more than 111,000 sq ft is under offer. Annual take-up is therefore on track to surpass the five year annual average of just above 100,000 sq ft.
Current vacancy rate stands at 8.5%. We estimate that around 80,000 sq ft of the stock currently available is obsolete. The lack of good quality space and fragmented supply historically resulted in occupiers having to work in multiple locations. The new stock coming online will set higher standards, whilst allowing occupiers to consolidate in a cost-efficient manner.
Office investment in the UK has slowed this year, 26% down on the corresponding period last year (Q1-Q3). However, Jersey’s office investment market has performed well. Total office investment volumes for 2015 topped £70m, nearly doubling 2014 volumes. This was significantly above the five year annual average of £25.7m. This year’s data shows the market has continued to perform positively-£68m has either completed or is under offer.
Prime yields are currently in the region of 6.25%. However, for trophy assets, with strong covenants and very appealing lease terms, we expect this to move in below 6%.