South East office market stages Q2 recovery
The office market in the South East has staged a recovery as the year approaches its halfway point, and changing tenant demands mean owners now have a “massive opportunity” to repurpose existing sites, according to a new report.
Take-up between April and June looks set to have risen to within 10% of its trend level, according to research from Lambert Smith Hampton. Headline rents have proved resilient, and seven of the 25 key South East markets tracked by LSH posted upticks.
Total supply has risen by 10% in the year since the pandemic began. That rise has been almost entirely driven by landlords, LSH said, with grey space accounting for just 3% of total supply.
The office market in the South East has staged a recovery as the year approaches its halfway point, and changing tenant demands mean owners now have a “massive opportunity” to repurpose existing sites, according to a new report.
Take-up between April and June looks set to have risen to within 10% of its trend level, according to research from Lambert Smith Hampton. Headline rents have proved resilient, and seven of the 25 key South East markets tracked by LSH posted upticks.
Total supply has risen by 10% in the year since the pandemic began. That rise has been almost entirely driven by landlords, LSH said, with grey space accounting for just 3% of total supply.
Ongoing remote working is reshaping demand, the agency’s report said. Occupiers are using lease events to find new premises that better meet their post-pandemic needs, often downsizing by between 10% and 15%.
Ryan Dean, head of office advisory at LSH, said: “The experience of the pandemic has pushed workspace considerations to the top of the boardroom agenda over recent months, with a surge of new and reactivated requirements pointing to activity moving above trend in the second half of 2021.
“But many occupiers are seeking out a hybrid, more flexible workspace solution. As occupiers increasingly look to exchange quantity for quality, landlords and investors have a massive opportunity to repurpose existing assets and capture a bow wave of demand for more flexible and environmentally sustainable solutions.”
In the investment market, Q2 deal value is likely to be double the £560m from the first quarter. Charlie Lake, LSH’s capital markets director, said: “There is a strong depth of global demand and keen pricing for thematic-led investments in the region, especially where life sciences is concerned. While demand elsewhere in the market is relatively diverse, activity is thinner, reflecting limited distress and an ongoing disparity in pricing aspirations between prospective buyers and sellers.
“While caution remains around pricing, there is a real opportunity to reposition second-hand buildings to be better aligned with occupiers seeking quick solutions, greater lease flexibility and reduced capital cost burdens. Investors that are willing to engage in active asset management plays have a huge opportunity to exploit the gap in the market and gain first mover advantage.”
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