Total investment into commercial offices in Q2 2021 across the South East region (excluding Central London) was £1.49 billion, the highest quarter for investment volumes since Q4 2013 and the second highest since 2005, according to the latest research from Knight Frank.
Office investment activity in the quarter was up 400% on Q2 2020, the first phase of the pandemic, but was also up 49% on the post-election period of Q1 2020, one of the busiest quarters for investment activity in recent years when £997m was invested in South East offices.
In the first half of 2021 a total of £1.97bn of offices was sold, the highest total for more than 16 years and higher than recorded throughout the whole of 2020.
Key transactions in the first half of the year included the sale of Ealing Cross for £70.225m, McLaren’s Technology Centre in Woking for £170 million and Heathrow business park Bedfont Lakes for £101 million.
TMT occupiers drive leasing as firms plan for return to offices
The leasing market also saw strong signs of activity returning in the first half of the year, with take-up in H1 rising to 1.37m sq ft, up 24% on H1 last year and the highest for a H1 period since 2018. This included six deals over 50,000 sq. ft, the highest number in a H1 period since 2016.
Technology, Media and Telecoms (TMT) firms underpinned leasing activity in the South East market in H1, taking 406,100 sq. ft. of space and making up 30% of all leasing deals across the region. The M4 is proving a particular market of interest to the sector accounting for 76% of TMT take-up in Q2. This included ITV’s commitment to 120,000 sq. ft. of space at Broadcast Centre in White City in June.
“This has been a particularly strong first half of the year for investment, with the exposure to growth industries such as life sciences and tech that the South East has, proving attractive to investors. Available stock of this type though is limited meaning strong bidding when opportunities appear,” said Simon Rickards, Head of South East Capital Markets at Knight Frank.
“Market activity has been dominated by larger strategic transactions which have supported the overall performance of H1. With the focus on best quality/ new space, choice is limited. This is resulting in several large commitments being advanced to secure space now. TMT and Life Science sectors have dominated activity hence the focus on the M4, Oxford and Cambridge markets- a trend set to continue in H2 as we emerge from the pandemic,” added Emma Goodford, Head of National Offices at Knight Frank.