Nine markets across the South East have become the main focus of office occupiers and investors, accounting for almost two-thirds of transactions over the past three years.
Knight Frank said 64% of leasing deals and 57% of investment volumes in the post-Covid era have been in what it called the “momentum markets” of Brighton, Cambridge, Guildford and Woking, Maidenhead, Oxford, Reading, south-west London, Watford and west London.
Of 33 leasings larger than 50,000 sq ft, 22 were in one of those markets, as were 12 of 16 investment transactions of more than £100m. Some 82% of space under offer today is in one of the nine markets, as are four in five active requirements and 94% of space under construction.
Seven of the nine markets registered prime rental growth above 4% in the past year, with the largest uplifts in Maidenhead (21%), Reading (17%) and Guildford (13%), followed by Watford (8%), Brighton (6%), Woking (5%) and Oxford (4%). Recent deals have set new records, including those at the Tempo scheme in Maidenhead, prelet to Stanley Black & Decker and Johnson & Johnson at £51 and £52.50 per sq ft respectively.
Life sciences activity has been a significant driver of deals. Cambridge and Oxford accounted for 48 of 142 transaction and half of investment within the momentum markets since 2020.
Roddy Abram, head of South East and Greater London offices at Knight Frank, said: “The South East is a hub for fast-growth businesses and innovation clusters, with some of the country’s leading academic institutions and a diverse array of office occupiers. The region is forecast to see one of the highest GVA growth rates over the next five years, a trajectory that will further boost the ‘momentum markets’ and add further upward pressure on rents. There is also a growing divide between location and building quality, with brand-new or recently refurbished buildings holding market preference, fuelling record rents in some locations.”
Simon Rickards, head of national offices capital markets, added: “Undeniably, the marketplace retains many challenges, but investors are now beginning to see price, project and timing in a more favourable light. Prime life science offices remain sought after, albeit there have been very few recent sales launched to the market recently. Income deals and prime multi-let assets in the better markets are also increasingly popular, and we could see yields come in once the cost of debt begins to ease.”
Photo courtesy of FTI Consulting
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