Publication

Market in Minutes: Greater London & South East Offices

Take-up at the end of H1 2022 was 26% below the long-term average. There has been an uptick in activity from smaller occupiers in Q2 2022. Supply levels in the market remain below average, and record rents continue to be achieved




Activity from smaller occupiers was the highest since the start of 2020 in Q2 2022

Take-up volumes across the Greater London & South East market at the end of H1 2022 reached 1.1 million sq ft, which was 26% below the long-term average for the first half of the year. The weaker activity in the market can be predominantly attributed to the limited take-up recorded in Q1 2022, where 492,000 sq ft was transacted, which was 42% below the ten-year average for the first quarter of the year. There has, however, been an uptick in leasing activity in Q2 2022 with 651,000 sq ft transacted, which represented a 32% increase on the take-up recorded in Q1 2022. The Western Sector continues to be the most active region of the market area, accounting for 62% of take-up recorded across the wider market area at the end of H1 2022.

There was an increase in activity from smaller occupiers in the market in Q2 2022, with 32 deals recorded between 5,000 and 10,000 sq ft which was the highest quarterly total for this size band since the start of 2020. There has, however, been a fall in deals recorded from medium-sized occupiers, with the second lowest level of deals recorded between 10,000–29,999 sq ft at the half-year stage in 2022 when compared to the previous ten years for the same time period.

Large corporate activity has been above average levels with four deals recorded over 50,000 sq ft at the end of H1. These deals included Tech Data leasing 52,000 sq ft at Maplewood, Chineham Park, Basingstoke and Bosch acquiring Broadwater Park, Denham, which comprises 97,000 sq ft.

Technology companies were the most active business sector in H1 2022, accounting for 32% of take-up recorded

Steven Lang, Director, Commercial Research

The flight to quality in the market continued in Q2 2022, and at the end of H1 2022, the proportion of space transacted being Grade A space totalled 57%. This proportion rises to 64% when focussing solely on the Western Sector. The continued polarisation in demand between Grade A and B space is expected to continue throughout the year.

Technology companies were the most active business sector in H1 2022, accounting for 32% of take-up recorded. There were six deals recorded over 20,000 sq ft from the sector in the first half of the year, including the aforementioned Tech Data letting in Basingstoke and Ultra Electronics pre-letting 56,000 sq ft at Building 1 Foundation Park, Maidenhead. Activity from the technology sector was concentrated in Reading and Guildford, where there were six and four transactions, respectively.

The prospects for corporate activity in the market remain strong. There are nine requirements in the market over 50,000 sq ft. There are a further 29 occupiers with lease expiries over this threshold in the next two years.


Supply levels remain below average

At the end of Q2 2022, there was 14.8 million sq ft available across the market area, which represents a 5% increase from the end of 2021 but still 6% below the long-term average. The increase in supply has been predominantly caused by secondary space being returned to the market. There has been a 20% increase in the availability of Grade B space since the end of 2020.

The development pipeline in the region is limited, with 1.9 million sq ft under construction or comprehensive refurbishment that is set to complete by the end of 2024. This, however, only equates to seven months of take-up in an average year. A notable recent construction start was Building 1 Station Hill, Reading, where 276,000 sq ft is being speculatively developed. This is the largest new build development outside of the Greater London market area in the last ten years.



Record high headline rents continue to be achieved

The ongoing occupier preference for Grade A space has resulted in record rents continuing to be achieved. Croydon, Maidenhead and Wembley all achieved record rents in Q2 2022, which followed on from 13 submarkets achieving record high headline rents in 2021. The polarisation in demand for prime and secondary office space is evident in the rental levels achieved. At the end of H1 2022, there was a 51% premium for average Grade A rents when compared to average Grade B/C rents, which is the widest gap in the last five years.