COMPANIES dealing with technology have helped the south east see a growth in real estate leasing, with the highest number of deals completed since 2018.
Global property consultancy Knight Frank says that a flurry in demand during the final quarter of 2022 saw leasing activity in the south east increase 37% compared to the previous quarter.
And in all, there were 809,121 sq ft-worth of transactions during the quarter. Across the year, there was 2.75million sq ft rented – an increase of 6% on the previous year, with technology, media and telecom companies accounting for 26% of leasing deals and 23% of space taken.
Knight Frank’s figures said that grade A office spaces accounted for 87% of all space taken, with 36 out of 55 South East office markets recording an increase in prime rents.
Overall vacancy for the South East finished the year just above the long-term average at 7.6%, while availability for new or recently refurbished offices remained unchanged over 2022.
The representation of grade B, or secondary, office stock to overall vacancy is at its highest level since 2014.
The investment market saw transactions worth £748 million in Q4 2022, taking turnover for 2022 to £2.8 billion. The figure is down 31% compared to the previous year, albeit 2021 was a record year for South East office investment. When compared to the 10-year annual average, investment volumes in 2022 were just 5% behind.
The year saw 93 investment deals complete, with UK buyers accounting for two-thirds of the transactions. However, overseas buyers were responsible for four of the six deals to complete with a price tag of £100m or more.
Roddy Abram, head of national offices at Knight Frank, said: “South East office take-up remained resilient over 2022, despite macroeconomic shockwaves and hybrid working patterns.
“While the average size of transactions has reduced, the number of occupiers looking for the best-in-class space has increased, evidenced by deal count and how most new leases were for new or comprehensibly refurbished modern offices. With the need to justify the rising costs of refurbishment and development, we continue to see rental growth across the prime South East locations and 2023 looks likely to be more of the same with the best quality buildings that are ESG compliant and amenity-rich continuing to experience competitive tension.”
This view was echoed by his colleague Simon Rickards, the head of soith east capital markets, who added: “Many factors impacted investor sentiment throughout 2022. Geopolitical instability, inflationary pressure and supply chain constraints, the Mini Budget and the increasing cost of debt all provided various headwinds.
“Despite this, investment volumes for 2022 totalled £2.8bn, just short of the 10-year annual average.
“After a period of pricing discovery in Q4, brought about by these headwinds, transactions have begun to take place at a rebased level with relative increased stability.
“On the whole, 2022 saw a continuation of what was witnessed in 2021, including a focus on prime buildings and locations, the softening pricing of secondary assets, significant interest in life sciences opportunities and repositioning of tertiary assets that risk obsolescence without capital expenditure.
“In 2023, we anticipate that these themes will continue, with the investment market mirroring the flight to quality displayed by occupiers being a key consideration.”
