Q1 take-up up 7% on previous year despite economic uncertainty
During March, take-up reached 245,614 sq ft. Although this is down on the previous month’s figure, the number of transactions was actually slightly higher at 35. This took Q1 take-up to 792,134 sq ft across 84 transactions, up 7% on Q1 2022, despite the quiet start to the year. However, this remains 20% lower than the ten-year average.
The largest transaction to complete was Oakley Capital’s pre-let of the entirety of Holbein Gardens, SW1 (26,500 sq ft), which has recently undergone a comprehensive refurbishment, bringing it up to a BREEAM ‘Outstanding’ rating.
Four of the five largest transactions were pre-lets, bringing the total number to eight for this quarter, in line with the same number we saw in the last two quarters of 2022.
We continued to see strong demand from the Insurance & Financial Services Sector, which accounted for 39% of Q1 take-up, and is particularly evident in the core. For example, in Mayfair, the sector made up 76% of leasing activity, and helped push the submarket’s quarterly take-up to 73% above the ten-year average.
Rents have continued to diverge between the ‘best and the rest’ this quarter, despite lingering cost pressure faced by occupiers. Average Prime rents stood at £134.67 per sq ft, up 5% on the Q4 average, while average Grade B rents have continued to decline, falling by 3%.
70% of space currently under offer is either in development pipeline or was recently delivered. This suggests that ongoing preference for higher quality offices will continue to support prime rents going forward.
The total amount of space under offer also remains high, standing at 1.3m sq ft and 35% above the ten-year average. Although the lengthened transaction timelines have contributed to this, it nevertheless provides cause for optimism for the months ahead. Moreover, active demand has steadily increased since the end of last year and is up 20% since the end of the previous quarter.
Supply increased 9% to 8.0m sq ft this month, primarily as a result of a significant 700,000 sq ft of speculative future developments being added to supply. This resulted in the vacancy rate rising 60 bps to 6.7% – the highest since October 2021.