Real estate advisor Savills predict the development of Jersey’s International Finance Centre could spark improvements in office space elsewhere in St Helier.
It’s one of their predictions as part of new research of the Channel Islands market which found solid demand for prime office buildings in Guernsey and Jersey from both domestic and international investors has maintained prices, with development activity in Jersey offering an opportunity for the market to expand in the coming years.
According to Savills, the islands’ good covenant strengths, appealing long lease structures and a stable economy make office assets a resilient investment. However, the pool of investors in the market remains smaller than that for the UK, resulting in prime office yields remaining approximately 100 basis points above those in other UK cities at 6.5% in Guernsey and 6.25% in Jersey.
The study goes on to say prospects for the occupational markets look positive with low supply in Guernsey and little development activity in the pipeline meaning headline office rents will be maintained at £42 per sq ft for the best quality stock.
In Jersey rents are currently £35 per sq ft, having grown 9% since 2012. Vacancy rates in both islands are estimated at 10%, but 5% among prime stock in Jersey and just 2% among prime stock in Guernsey.
Jersey will see the completion of the second phase of the International Finance Centre in St Helier this summer, providing 470,000 sq ft of new space, adding 16% to the island’s existing office stock. Much of the space is believed to be pre-let to tenants relocating from older, inefficient spaces, say Savills, so the market’s supply/demand balance will be maintained, with the development potentially bringing investable stock to the market as St Helier’s offices are expanded and brought up to international standards.
Tony Rowbotham, Director of Savills Guernsey, comments: “Office-based employment remains steady across both Jersey and Guernsey with leasing activity largely being driven by occupiers relocating from inefficient or substandard space to higher quality offices with larger floorplates.”
“The investment market is consistently solid, offering opportunities for those able to look beyond traditional destinations on the UK mainland, with Jersey in particular being at an interesting stage with the IFC set to drive activity in the coming years and trigger an uplift in quality across the board.”