The South East office market saw an impressive bounce back during the first quarter of the year, according to commercial property specialist Colliers.
The firm’s South East Offices Snapshot for Q1 2021 shows that quarterly take-up increased by 172 per cent quarter on quarter to 951,744 sq ft, and was 38 per cent above the five year average.
Investment in South East offices totalled £639 million across 35 transactions making it the second busiest first quarter over the past five years. Around 50 per cent of those transaction volumes were for life sciences or alternative use assets, with Cambridge accounting for £206 million (32 per cent) of investment volumes across four transactions.
Around half of South East office take-up was accounted for by Three UK signing up for 117,000 sq ft at Green Park for a new headquarters, and Unilever confirming its intention to centralise five separate existing locations at a new Kingston campus, which will total 363,000 sq ft across two new buildings.
Guy Grantham, director in the Research & Economics team, said: "While the two deals accounted for 50 per cent of take-up in Q1 21, the remaining total still represented a quarter-on-quarter uplift of 37 per cent. Equally, public sector activity accounted for 17 per cent of transactions, a significant portion from the Department for Work and Pensions (105,000 sq ft).
“Improved levels of activity demonstrated by 34 transactions above 5,000 sq ft, compared to just 18 in Q4, provide evidence of growing occupier confidence in the UK vaccination programme and the direction of travel in terms of a path back to where companies can start to make decisions.”
Mark Taylor, Colliers South East offices team, noted: “Occupier appetite for Grade A and best quality second-hand accommodation typifies concerns over ‘future-proofing’ and secure, healthy working environments for those who will be based or will return to the office.
“Key locational requirements for occupiers - public transport connections and local amenities - will remain critical. At the same time, we have already seen an increased demand for bicycle storage / EV charging points and amenity rich environments rise much further up the occupier priority list.”
Of the £639 million transacted in Q1 South East office investments, approximately 56 per cent was accounted for across five transactions.
Brockton Everlast acquired 214-240 Cambridge Science Park, Cambridge for £98.7 million; an overseas investor acquired Procter & Gamble, The Heights, Weybridge for £49.55 million; Bruntwood SciTech acquired Melbourn Science Park, Cambridge for £46.2 million; Brockton Everlast acquired 418 & 436 Cambridge Science Park, Cambridge for £45.4 million; and Oval Real Estate acquired R+, Reading for £40 million.
Chris Lewis, head of South East Office Investment at Colliers, commented that Q1 investment results demonstrated the market is strengthening.
“Any concerns over the South East office market’s Q1 performance have been dispelled following a strong start to the year with £639 million of investment volumes across 35 transactions,” he said.
“The first quarter of the year is traditionally the quietest with a number of transactions being carried over from the previous year which bolster the results. Whilst it was no different this year, it has been particularly encouraging to see the Q1 levels almost identically match the five-year Q1 transaction volume average of £640 million.
“Significantly this comes on the back of the large-scale disruption to the South East office investment market over the past 12 months. In this context starting the year with 35 transactions, the second busiest Q1 over the past five years, makes it justifiable to take an optimistic view about the remainder of the year
“All eyes will now focus on Q2, and I will be interested to see whether the start of the predicted up-tick in the economy will be mirrored with vendor confidence to deliver opportunities to the range of buyers keen to invest in the sector”