South East leasing activity in Q4 2019 was strong, with 592,764 sq ft transacted. Quarterly take-up was 7% up on Q3 2019 levels. Political and economic uncertainty affected take-up levels in 2019 while total leasing activity reached c. 2.6 million sq ft, which was 29% lower than 2018 year-end take-up activity.
Take-up in Q4, was dominated by the L’Oreal pre-let at The Gateway, White City for 120,000 sq ft. L’Oreal’s commitment to White City is not only a strategic decision for the company but further reinforces White City as an established, innovative and thriving office market.
Office take-up across the South East in 2019 was focussed on Grade A, with roughly 1.8 million sq ft of Grade A offices transacted, which accounted for, on average, 71% of take-up between 2017 and 2019.
Supply levels in the South East continue to be eroded as vacancy levels are now at just 7.8% down from 11.2% in 2015. We expect to see sentiment in the South East office market grow in confidence during 2020 as Grade A vacancy continues to fall.
The key investment trends of Q4 2019 were:
- Office business park transactions accounted for approximately 44% of total investment volumes and attracted the most diverse group of buyers.
- Overseas investors were particularly active accounting for a 35% market share of transaction volumes, with a preference for larger lot sizes.
- Private equity buyers, who were absent in Q3, had the second highest transaction volumes of the quarter, accounting for £247 million (20%).
- Property companies had the largest market share by transaction number accounting for nine transactions out of 44 in the quarter (20%).
- Continued demand remains for defensive assets in town centres or those offering long income secured against strong covenants.