S&P business parks, particularly those in the South East, are well placed to take advantage of the demand for high income, low risk assets that has emerged as more and more investors are pushed out of the overpriced London market.

Despite the continuing view that activities are focusing on urban centres, a stable base of tenants still requires such locations. While low prices and considerable potential for refurbishment means the prime end of the sector has much to offer investors, according to the latest report from Strutt & Parker and IPD. The S&P Business Parks Index said that almost 5.17 million square foot was needed in the South East alone, and that with speculative developments non-existent demand will fall on existing stock. 

"A unique kind of tenant wants to utilise business parks," explained Stephanie McMahon, Head of Research at Strutt & Parker, "and these have not gone away - hence there is still healthy demand for space in parks with good access, modern facilities, and adaptability - basically, prime stock.
"Income returns for business parks have been resilient over the last five and ten years, and we expect that to continue - and at a more stable rate than offices in general in the UK, which have a considerable proportion of top slice income set to expire."

Yields on the parks were up to 8.0 per cent by the middle of this year, compared to 4.6 per cent for Central London offices. Vacancy rates are some of the lowest in of any office segment or area, and only in the North of England are they higher than other office types.

Rental value growth, an indicator of tenant demand, continued to grow last year, by 0.4 per cent, and S&P parks were the only office type outside of London to see rental value growth.

Victoria Mejevitch, Head of IPD occupiers, explained the demand from tenants: "One of the most important requirements for large office occupiers is adaptability of space - they prize being able to change large, open plan offices to their own requirements.
"Business parks are well suited to provide this adaptability. Furthermore, though a number are in need of refurbishment, this provides an opportunity for investors to adapt these spaces to the needs of 21st century tenants, providing the next generation of working environments for occupiers."

View a summary of the Strutt & Parker/ IPD Business Parks index.

Read the full Strutt & Parker/ IPD Business Parks Index.