Investment volumes along the Western Corridor office market were muted in the first quarter of 2018 with £350m of transactions taking place compared with £560m of deals in the first quarter of 2017 – a fall of 37%, JLL has reported.
However, it said take-up across the region totalled 516,000 sq ft, representing an increase of nearly one-third (31%) compared with the first quarter of 2017.
The start of the year has been characterised by smaller deals with the majority (80%) of activity for floorspace between 10,000 and 50,000 sq ft.
Deal numbers also increased by 50% to 36 deals for the first quarter this year, up from 24 deals in Q1.
Occupiers have continued to be primarily focused on securing well-located, good quality space, with grade-A take-up accounting for 70% of the deals at the start of the year, while supply levels have flattened, falling below 10m sq ft, which JLL said it expected to shrink more over the course of the year.
It added that it expects vacancy rates to continue to decline into 2020 along the Western Corridor as active speculative development reduces.
James Finnis, head of south east office agency at JLL, said: “The lack of new supply coming through in the wider South East market is becoming acute. The development pipeline in 2019 and 2020 is limited and a number of key centres face supply shortages, assuming net absorption continues on its current trend.
“Developers and investors across the region are generally risk off as a result of political and economic uncertainty, but the sustained levels of demand should encourage them to assess their portfolios and look at development and refurbishment options that can be brought forward when the risk appetite improves.”
Angus Minford, director of capital markets at JLL, said: “2017 saw record transactional volumes which were heavily assisted by a flurry of business park transactions, conditions which were unlikely to be replicated in the first quarter.
“Availability of suitable product remains thin and motivated sellers remain in short supply.”
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