Developer demand drives shift in Surrey and Hampshire office market

Alternative use deals rose as the investment landscape evolved in 2024

A new report from Curchod & Co reveals a significant shift in Surrey and Hampshire’s office investment market during 2024, with developers increasingly targeting buildings for alternative uses.

According to the firm’s Office Investment Market Snapshot, 47% of office transactions this year were for alternative uses – a sharp increase from 18% in 2023. Developers accounted for nearly half of all buyers, while property companies made up around 35%. The report highlights that almost 700,000 sq ft of office space has been purchased over the past two years by developers seeking repurposing opportunities.

“There has been a clear pivot in investor priorities,” said Alex Blown, Associate Partner at Curchod & Co. “Ageing office buildings are no longer seen purely as workspace investments, but as opportunities for redevelopment or conversion. This shift is driving activity, particularly as values soften and yields adjust to reflect new market realities.”

Despite a 14% year-on-year drop in the number of transactions, total investment volume rose by 21%. However, this was largely driven by the £112 million acquisition of Cody Technology Park by XLB/Tristan Capital – the largest deal of the year.

Other notable deals included Investec’s £19 million purchase of 255 High Street, reflecting a net initial yield of 8.2%, and Surrey County Council’s acquisition of Victoria Gate in Woking for £18 million (£270 per sq ft).

Market fundamentals continued to adjust in response to weaker demand and economic pressures. Average yields increased to 12.87%, up from 9.23% in 2023, while average capital values fell sharply by 42% to £152 per sq ft. Properties intended for permitted development (PD) conversion traded at an even lower average of £127 per sq ft.

Vendor profiles also shifted, with investment funds and property companies each accounting for around 40% of sales. Owner-occupiers and local authorities made up the remainder.

The report also noted a 24% average discount to quoting prices in 2024, compared to 9% in the previous year, indicating softening market conditions.

Download the full report for detailed insights and data.