South East office investment volumes drop by 40%

South East office investment volumes fell by 38% to £428m in the first three months of 2019 compared to Q1 2018. However, despite the fall, the figure is similar to the 10-year average of £426m. Simon Rickards, partner at Knight Frank, said: “2019 has started relatively slowly from an investment perspective. “Volumes are almost exclusively being held back by the uncertain political sphere, with neither buyers nor sellers under particular pressure. “What is clear, however, is that once some political clarity returns, we expect to see a re-emergence of the overseas buyers who have been quiet to date in 2019. “In addition, we anticipate increased appetite from UK investors, attracted by low vacancy levels in the M25, ever-improving infrastructure and attractive returns relative to other sectors.” Meanwhile, office letting volumes fell by 7% from 744,528 sq ft to 692,143 sq ft. This was 14% below the 10-year average of 800,460 sq ft. Accounting for 63% of the total take-up in Q1, the M4 market remained the key focus of occupier activity, with take-up reaching 439,557 sq ft. Reading recorded 11 deals in Q1, totalling 138,800 sq ft, which although less than recorded in Q4 2018, is 44% above the 10-year average. Availability remained a restraining factor to occupier activity. At the end of Q1, vacancy in all markets (M25, M3 and M4) finished around one-fifth below their respective 10-year averages. The development pipeline offers little respite, with just 849,000 sq ft of speculative space set for delivery over the next 24 months. Emma Goodford, head of national offices at Knight Frank, said: “Despite Brexit, occupiers continue to focus on their key requirement of creating a workplace to attract and retain people. “Interestingly, 80% of the quarter’s deals were sub 20,000 sq ft, meaning larger corporates continue to show that they will play a waiting game if they can. “The western section of the region continues to dominate, with west London and key towns along the M4 seeing the highest levels of activity. “With development well below the 10-year average, an impending supply crunch is likely in some markets within the next 18 months.” To send feedback, e-mail anna.ward@egi.co.uk or tweet @annaroxelana or @estatesgazette