An ‘interesting cocktail’ as M25 leasing activity rises – Knight Frank
Knight Frank has reported a bounceback in occupier activity in the M25 area and M4 corridor offices during the first quarter of this year, but says take-up in the M3 region remains relatively subdued. Take-up in the M25 market was 646,517 sq ft in Q1 2013, the highest quarterly total since Q4 2011 and 20% above the five-year quarterly average, Knight Frank notes. There were 40 deals in this area during the quarter, the most seen in any quarter since Q3 2008.
The M25 vacancy rate fell to 7.7% for the quarter, the lowest since Q1 2009, as the lack of speculative development continues to have an effect. But Blackstone began construction of Building 7 at Chiswick Park during the quarter – at 334,000 sq ft, this is the largest single speculative development in more than 20 years, Knight Frank says, and has by itself increased the amount of speculative development in the M25 area by 63%.
Knight Frank says M25 take-up activity rose across all size brackets, as occupiers are gaining in confidence and their finances are improving. However, they are facing less choice, says Emma Goodford, head of South East offices, which she describes as “an interesting cocktail” in prime markets with limited stock. She says occupiers are continuing to focus on the best quality space, which is encouraging landlords to reposition buildings in those markets where a shortfall in supply is putting upward pressure on rents.
“The West London markets of Hammersmith, Richmond and Chiswick are performing fantastically, with prime rents reaching record highs in 2012. With new and Grade A supply set to tighten further along the Western corridor, evidence suggests that concrete rental growth will spread to other key markets” this year, she says, such as Staines offices, office space in Maidenhead and Uxbridge office space.
In the M4 corridor, take-up reached 426,377 sq ft, which is a rebound of 46% from the previous quarter’s subdued total and the sixth strongest quarterly total seen over the past five years. The vacancy rate in this area is now 9.8%, down from a peak of 12% two years ago. Activity in the M3 region, however, was 7% below the five-year quarterly average in Q1 2013 at 179,616 sq ft. This is 20% below the 10-year quarterly average.
