UK’s South East office market makes strong start to 2016

Taylor Scott International News

Office market in the South East of the UK has seen the strongest start to a year since 2008, according to new research. Overall take-up in the South East Office market increased by 30% in the first quarter of 2016, according to the latest M25 Offices report from Knight Frank. A total of 973,000 square feet of space was let or acquired during the quarter, 10% above the 10 year average. The high level of take-up ensured that overall supply remains historically low with availability across the South East markets 25% to 30% below the long term trend. The report says that following record investment volumes in 2015, the first quarter of this year has recorded £494 million of investment, which is consistent with the 10 year average. It points out that the £325 million acquisition of SEGRO’s 972,000 square foot office portfolio in Slough by AEW was significant representing, not only the largest transaction in the South East market for two years, but also further evidence of overseas purchasers becoming more active and widening their UK focus beyond Central London. With stock levels improving in the second quarter of 2016 Knight Frank predict an increase in transaction volumes from the middle of the year and expect investment volumes to be close to £2 billion by the end of the year. Emma Goodford, head of National Offices at Knight Frank, said that overall take-up in the first quarter has been encouraging, particularly set against increased market anxiety relating to the forthcoming referendum on the future of the UK in the European Union. ‘Although, some decision making will clearly be deferred until after the vote, we continue to see interest rise from diverse array of occupiers with active named demand topping 6.6 million square feet. With this in mind, we are predicting strong rental growth in key locations, particularly where new development is accompanied by infrastructure and amenity improvements,’ she explained. According to Tim Smither, head of National Offices Investment at Knight Frank, the weight of capital targeting opportunities in the South East remains robust. ‘Whilst some investors pause to await the outcome of the EU referendum, others are seeing opportunity. In particular, high yielding, asset management opportunities remain keenly sought after, supported by a strong rental growth outlook for the region,’ he said. Taylor Scott International

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