Knight Frank revises South East market forecast M4 office take-up on road to its highest level since 2007

Knight Frank has significantly revised up its forecast of office take-up in the South East region for 2013. Take up in the M4 corridor is now expected to reach 2m sq ft in 2013, its highest level since 2007 and 20% above the ten-year annual average, while take-up in the M25 area will increase to 2.5m sq ft, its highest since 2008.

The improvement in activity is not specific to increased activity in any one sector, with a noticeable increase in a diverse profile of demand from financial and business services, technology, energy and utility companies. While larger deals are an important driver of overall take-up, the frequency of transactions has also increased, indicating greater depth and breadth of activity in the South East market.

Emma Goodford, Head of National Offices, said; “Whereas occupiers regularly resorted to re-gearing their leases during the height of the downturn, improving business sentiment is instilling occupiers with greater confidence to commit to relocations, driven by a desire to upgrade their existing space or accommodate expansion”.

“We would liken current conditions to that of 2004, when the market began to recover following the dot-com collapse three years previously. This time, the development pipeline is far more limited, so pent up demand will spur a new cycle of rental growth across the South East. Headline rents have already risen to record highs in the key West London markets, and this is going to extend more widely into the Thames Valley and the prime Surrey towns over the next 12 months. This is further buoyed by improving market sentiment, driven by the recent successful activity in the South East investment market.”

Following robust take-up in H1 2013, notable deals during the summer have included Dunnhumby’s 115,000 sq ft pre-let in Hammersmith, Rackspace’s 100,000 sq ft pre let of HPH2, Hayes and Nexen’s 82,403 sq ft acquisition of The Stanza Building, Uxbridge which was developed speculatively by Rockspring and Bell Hammer and which let within 6 months of completion.

Total space presently under offer stands at 825,000 sq derived from 6.2m sq ft of unsatisfied active named demand. Knight Frank’s research reveals that the number of deals in the first half of 2013 was at its highest for the first half of a year since 2008.

Tim Smither, head of South East investment, commented; “Activity in the SE Investment market has accelerated in Q2 and broadened to include interest in short income and vacant prime stock. This pick-up mirrors the improved occupier sentiment and the expectation that prime markets will see higher headline rents.”