Office take-up in South East England reached 1.2 million sq ft in Q3 2018, a total 53% above the 10 year quarterly average. Take-up has almost double since Q3 2017, which reached 544,400 sq ft. This is the first time that quarterly take-up in the South East has exceeded 1 million sq ft since Q3 2015, according to the latest research by global property adviser Knight Frank.
Q3 generated the largest deal in the M4 corridor since 2012, with Publicis, the French multinational advertising and public relations company, taking 211,000 sq ft at Television Centre, White City. This was one of four deals above 50,000 sq ft to complete in the South East in Q3. Prior to that, the largest deal to complete in 2018 was 49,250 sq ft.
The third quarter also delivered a higher than average number of transactions, with 69 deals compared to a 10-year quarterly average of 50. This resulted in 191 deals concluding in the first nine months of 2018, the highest level for the period since 2008.
Investor sentiment also continued to strike a positive tone with investment volumes in Q3 reaching £693 million compared to £540 million in Q3 2017. Led by Spelthorne Borough Council’s acquisition of Brockton’s South East portfolio, UK councils were active in representing 58% of the South East office investment deals in Q3. Council spending on South East offices for the year has now reached £725 million, meaning that Councils currently are the largest buyer group in 2018.
Emma Goodford, Partner at Knight Frank commented: “Despite the challenges emanating from the political arena we are seeing sustained interest in the South East office market from both occupiers and investors. The Publicis deal, which was the largest in recent years, signifying that not only are deals happening frequently but that they also have the potential to happen at scale. The South East is extremely attractive for businesses and its draw will continue to increase as infrastructure schemes such as the Oxford Cambridge Expressway and Crossrail enhance the regions connectivity. A looming supply shortage and associated lack of choice, is also cited as a reason occupiers are continuing to commit.”
Simon Rickards, Partner at Knight Frank commented: “The South East market attract a global investor audience; however, UK councils continue to dominate transaction volumes. In fact, figures for 2018 show that Council spending makes up 37% of the market, an increase from 15% in 2017. With plenty of capital looking to be deployed we predict an active end to the year, with the potential for volumes to reach £3 billion by year end.”
