Microsoft hunts for new London HQ on Elizabeth Line - FT

Microsoft hunts for new London HQ on Elizabeth Line - FT

Microsoft Acquires New London Headquarters on Elizabeth Line Amid Mixed Regional Office Market

Microsoft has acquired a 246,138-square-foot office campus in Reading, Thames Valley, for £100 million, marking its continued presence in the UK tech hub. The property, developed specifically for Microsoft and leased entirely to the company at £27 per square foot, is strategically located near Reading town center and benefits from direct access to the Elizabeth Line. The sale, facilitated by The Valesco Group and AIP Asset Management, reflects a net initial yield of approximately 6.6%.

The Elizabeth Line, which connects Reading to central London and the City, has become the UK's busiest rail line since its 2022 launch. However, its impact on office demand in the Thames Valley has been uneven. While the line has improved connectivity, Reading's office vacancy rate remains at 17%, above the national average, with over 50 years' worth of supply at current leasing rates across the region. Developers have struggled to fill speculative projects, such as One Station Hill (70% pre-let) and Forbury Place, where Phase 2 remains 60% vacant.

Microsoft's decision to retain a Reading-based headquarters contrasts with recent relocations by firms like Amazon and Diageo, which have shifted staff to central London. The tech giant previously considered moving to central London but has opted to maintain its presence in the Thames Valley, where Reading is positioned as a "Silicon Valley" cluster for multinational corporations.

Market analysts note that while the Elizabeth Line has not spurred the anticipated office demand in Reading, infrastructure investments such as the £900 million Reading station upgrade continue to enhance the area's appeal. CoStar Group highlights that conversions of underutilized office spaces to residential units may help alleviate vacancy pressures in the long term.

Microsoft's acquisition underscores investor confidence in prime Thames Valley assets, despite broader challenges in the regional office market. The company's lease provides stable income for the property's new owners, backed by Microsoft's AAA credit rating. As companies weigh central London's amenities against the cost advantages of suburban locations, the Elizabeth Line's role in reshaping London's commercial landscape remains a work in progress.