The South East Office leasing market has struggled over the last 12 months due to hesitation around Brexit and then from March last year it was the uncertainty created by the pandemic. Despite this, there are positives to be had. Take-up in the South East showed q-o-q growth reaching 574,140 sq ft, marking Q1 2021 the largest quarterly take-up level since the pandemic began. This reflects a 39% rise on the same period last year (412,090 sq ft) and remains down just 7% on the long term quarterly average for take-up in the first quarter.
The continued success of the vaccine rollout means that a return to the office inches closer for many of us, but many of the trends either created or accelerated by the pandemic are yet to be fully understood. Looking ahead, we may see a continued marginal increase in leasing activity over the next quarters as 2020 pent up demand will provide a boost to take-up figures.
The largest deal of the quarter was to Three Network, where the Telecoms company leased 119,000 sq ft at Green Park, (400/450 Longwater Avenue) in Reading which provided a significant boost to take-up figures. Deals in the 5,000 – 20,000 sq ft size band continue to drive take-up in the South East at 74%. Activity in the 20,000 – 40,000 sq ft size band showed growth this quarter accounting for a 18% share of take-up, up from 16% in the previous year.
The Three Network deal contributed to growth in the Telecoms sector taking a share of 26% in Q1 2021, followed by the Chemical/Pharmaceuticals sector at 18%.
Vacancy rates now average 9.4% across the region but big variances with some towns well below the average for example Watford and Redhill & Reigate, increased from 7.2% pre pandemic but encouragingly still lower than anytime between Q1 2010 and Q4 2017.
This modest increase in vacancy rates is down to a combination of low levels of take up in 2020, tenant return space and speculative development completions coming to the market. Since the pandemic began in mid-March, 850,000 sq ft of tenant space has been released to the market.
Speculative completions in Q1 2021 totalled 540,000 sq ft which include a mix of new buildings and comprehensive refurbishments. Notable developments that reached completion includes Hyde Watford (68,000 sq ft) and One Victoria Street Windsor (45,000 sq ft) both developed by Legal & General.