An in-depth overview
Following the strength of demand over 2018 alongside current political and economic uncertainty, it is perhaps not surprising that occupier activity has fallen back over Q1 2019.
Over the course of the quarter, take-up reached 504,914 sq ft, a 20% decline on Q1 2018 and below the long run average.
However, despite overall market activity falling back, there were still a number of significant leasing deals recorded. The largest deal of the quarter comprised Discover Financial Services’ letting of 45,788 sq ft at Ascent 3, Farnborough Aerospace Centre.
BNP Paribas Real Estate recorded a number of deals over Q1 2019, acting for Hammersmith & Fulham Borough Council on their lettings at 3 Shortlands, Hammersmith (45,352 sq ft) and The Clockwork Building, Hammersmith (26,000 sq ft). BNPPRE also acted on a number of lettings at Winnersh Triangle, the largest of which comprised Regus leasing 34,500 sq ft.
In times of uncertainty, there is always a clear flight to quality, with occupiers opting for higher quality stock. Q1 2019 has been no different, with 83% of take-up concentrated within Grade A and New Grade A buildings.
Following this, it is unsurprising that the majority of take-up has been focused in the core M4 and West London markets over Q1, amounting to 68% of total take-up. It is these markets which have recorded the lion's share of speculative development in recent years and possess an overall higher quality available stock profile as a result.
Whilst occupier activity has slowed over this first quarter, the South East office market is well placed to withstand a slightly slower pace of demand.
Available supply across the South East remains below the long run average and in certain towns vacancy is especially low in comparison to history.
The overall quality of vacant space has also improved, with a significant proportion of the market's tertiary stock sold for conversion to alternative uses. The South East market's generally improved stock profile will help it remain an attractive location for prospective occupiers.
In terms of speculative development moving forward, the South East is due to see a limited number of schemes delivered. 2019 is due to see the delivery of just eight schemes totaling 550,000 sq ft, followed by four schemes totaling 394,000 sq ft in 2020.