The South East office market, defined as the Western Corridor and the markets to the north and south of the M25, witnessed a surge in take-up during the second quarter of the year.
According to new data released by Strutt & Parker, take-up between the end of March and the beginning of July 2015 rose by 41 per cent compared to the same period in 2014, equating to around 585,000 sq ft of office space.
This correspondingly allowed the half year take up to climb to 1.23 million sq ft, 14 per cent higher than during the first half of last year.
As seen during the first quarter, the vast majority of tenancy deals struck during the second quarter concerned either new or refurbished Grade A space – in fact, this accounted for 79 per cent of office transactions in the area.
Strutt & Parker believes that this indicates a desire by occupiers to acquire space in higher quality buildings, reflecting the strong business confidence brought about by the current economic climate.
Head of national markets office agency at Strutt & Parker, Ed Smith, believes that developers are now being rewarded for the confidence they showed in embarking on speculative schemes.
He says; “Over 176,000 sq ft of brand new Grade A space was transacted in Q2 2015, which not only reaffirms the importance that occupiers apply to high specification space but also that the developers who were confident in proceeding with speculative developments are being rewarded.
“Not only are these new buildings securing high profile tenants (and in the case of Virgin Atlantic taking Leonardo House in Crawley before completion) they are commanding rents that exceed pre-crash levels such as Maersk at Point in Maidenhead who are paying £35.00 per sq ft on the top floors.”
The rise in speculative activity is certainly coming at an opportune time, as the current supply vs demand levels in the South East are continuing to squeeze the market somewhat.
Fortunately, Strutt & Parker’s report also points out that around 1 million sq ft of Grade A office space is due to be completed by the end of this year, building upon the 68,000 sq ft delivered in the year to date.
Further speculative developments are also in the pipeline for the beginning of next year, with Brockton and Landid recently announcing plans to construct up to 100,000 sq ft of space at 1 Brunel Way in Slough.
Head of national markets at Strutt & Parker, Simon Bland, believes this news will be of interest to both international and domestic investors.
He says; “The vindication in relation to speculative development is also being experienced in the investment market. Where newly developed buildings have been traded they are setting new benchmark yields for this cycle at sub 5.25 per cent.”
