Resilient demand for new, modern workspaces saw South East & Greater London office take-up hit 979,125 sq ft in the first quarter for 2024, according to research by Knight Frank.
The total take-up figure is 12 per cent above the 10-year quarterly average and more than double of that recorded in Q1 2023.
Take up of new and Grade A offices accounted for a record 94 per cent of all letting transactions during the first quarter, with the flight to quality continuing to gather momentum. In comparison, Grade A office take up over the course of 2023 accounted for 82 per cent of total leasing volumes.
The first three months of the year witnessed the highest proportion of space leased at buildings under construction since 2001, with 421,600 sq ft agreed.
Notable deals included global pharmaceuticals giant Johnson & Johnson agreeing to 97,000 sq ft head offices in Maidenhead’s Tempo building (pictured), the Thames Valley’s most sustainable office-led development which is nearing completion. The deal saw a new record headline rent for the Maidenhead office market.
Oxford accounted for 28 per cent of quarterly take up, the highest out of all South East & Greater London submarkets, with electric vehicles manufacturer YASA Motors agreeing to lease 88,000 sq ft at Bicester Motion’s new Innovation Quarter. Phase one of the development is scheduled for completion in 2025.
Overall, there were five deals involving office space above 50,000 sq ft being let, the highest in just over two years, driven by lease events and corporate expansion plans. The financial and professional services sector accounted for 30 per cent of total take up.
Current active requirements stand at 4.8 million sq ft, having ticked above the five-year average of 4.6 million sq ft. While availability has increased 14 per cent year-on-year to 14 million sq ft, this has largely been driven by higher vacancy rates in older, secondary buildings.
Office investment transactions across the South East & Greater London submarkets in the first quarter increased by 83 per cent compared to Q4 2023, totalling £398 million. This figure remains 43 per cent below the 10-year quarterly average, with prime yields unchanged at seven per cent.
The relaxing of Permitted Development (PD) rules earlier this year, most crucially the lifting of the 1,500 sq m size limit, will help boost transaction volumes as PD buyers seek vacant or short term income offices for conversion. This is expected to reduce levels of secondary stock and, in turn, support leasing activity.
Roddy Abram, Head of South East & Greater London offices at Knight Frank, said: “Deals such as the Johnson & Johnson letting in Maidenhead’s Tempo building demonstrates that the transition towards modern, sustainable offices with good transport connections and a strong amenity offer is here to stay.
“The volume of demand for new and best quality offices, against a stalled development pipeline, means that rental values continue to trend upwards in premium buildings. This contrasts with the secondary stock currently available, which continues to witness higher vacancy rates and value erosion without the necessary capital expenditure.”
Simon Rickards, head of national offices capital markets at Knight Frank, said: “With inflation falling and the economy showing signs of stabilisation, investor confidence around pricing is steadily increasing.
“This will also be coupled with more motivated asset owners, with the buyer and seller gap narrowing, particularly for prime office buildings. South East and Greater London office assets are attractively priced by historical standards, and contrarian buyers are looking for value-add opportunities to build out the high quality stock which is in short supply.”
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