Historically an unloved part of south London, Croydon has worked hard to shed its undesirable image in recent years. The borough is in the midst of an ambitious £5.25 billion regeneration project aimed at enhancing its economy and infrastructure. It has attracted significant inward investment over the last few years that has fuelled increasing demand for office space, as reflected in its first-place ranking in the 2016 CoStar 50 Occupier Activity Index *.
The vitality of Croydon’s office occupier market is reflected in the pace at which the vacancy rate has fallen since 2014. A blend of sustained demand, lack of new construction, and a raft of conversions to alternative uses—there have been more office-to-residential conversions in Croydon under permitted development rights than in any other part of the UK—have caused the vacancy rate to fall to below 5% recently, from around 14% three years ago. Notable moves to the market include EDF Energy and The Body Shop, both of which relocated their headquarters from Central London, while HMRC opened its first regional office hub at Schroders and Stanhope’s Ruskin Square development this summer.
As a result of these supply and demand imbalances, average office asking rents in Croydon have risen by around 50% since the beginning of 2014, compared with sub-20% in many neighbouring boroughs. Despite this, rents remain much lower than in Central London, where exponential rental growth in recent years has proved too costly for some occupiers.
While office leasing has been noticeably quieter in 2017, the borough received a boost this month when Westfield and Hammerson received resolution to grant outline planning consent for their £1.4 billion transformation of the high street, aimed at enhancing the town’s public realm. Developers of schemes such as One Lansdowne and Ruskin Square will hope Croydon’s upside potential remains of increasing interest to occupiers. The challenge for the borough going forwards will be to maintain the positive momentum it has built up over recent years.
*The CoStar 50 Occupier Activity Index captures occupier activity across the UK’s 50 largest office markets, utilising CoStar’s market-leading database of commercial property information. The ranking system measures demand by comparing net absorption in each city in 2016, relative to its stock size and peers.
CoStar’s latest M25 South East office report can be found here.