Office leasing activity across the South East and Greater London increased 30% in the third quarter of 2023, according to new data from Knight Frank.
Q3 take-up of 870,831 sq ft was marginally (3%) above the 10-year average and represents the highest quarterly take-up figure so far this year.
Ninety transactions completed in Q3 – above the quarterly average of 60 – and 83% of space leased was in new or Grade A buildings.
Oxford and Cambridge accounted for 26% of total take-up in the quarter – so far this year the two cities have accounted for 31% of total take-up in the South East. The largest deal in Q3 in the two university cities was the Nuclear Decommissioning Authority taking 53,000 sq ft at Oxford’s Harwell Science and Innovation Campus (pictured).
Heading into Q4 2023, Knight Frank said 1.3m sq ft of space is currently under offer, with Cambridge and Oxford accounting for 20% of this total.
The firm added there was 5.4m sq ft of active demand at the end of Q3 2023 – the highest total for two years.
Investment transactions in the third quarter totalled £112m, with more than £500m of stock currently under offer or recently exchanged at quarter end, according to Knight Frank. Prime office yields in the South East softened by a further 25bps to 6.75% in Q3.
Roddy Abram, head of South East and Greater London offices at Knight Frank, said: “Whilst Q3 was again dominated by the Oxford and Cambridge, greater interest and optimism is developing across other key South East markets. The level of space under offer and new requirements remains encouraging, with prime product monopolising activity and enquiries. Viewings are certainly rising, particularly for grade A space, and these indicators substantiates our opinion of a gradual upward trajectory for the South East market.”
Simon Rickards, head of national offices capital markets at Knight Frank, added: “Although Q3 volumes were lower than historical levels, we are seeing an increasing numbers of buyers looking to invest in both income deals and the stronger office markets. There is now a growing conviction that we have reached the bottom of value erosion, at least for the better quality stock. A busy end of year is anticipated.”
