Take-up across the South East office market (defined as the Western Corridor and the north and south M25 markets) totalled 585,000 sq ft in Q2 2015 according to Strutt & Parker.

The take-up figures for the second quarter of 2015 represent a significant increase of 41% from the corresponding quarter of 2014.  The research also shows that at the half year mark, take-up for offices across the South East stands at 1.23m sq ft, a 14% jump on the first half of 2014. 

Echoing the trend from Q1 2015 Strutt & Parker’s research found that 79% of transactions in the South East in Q2 2015 were on new Grade A or Grade A space, demonstrating a flight by occupiers to quality buildings.

Ed Smith, head of national markets office agency at Strutt & Parker said: “Over 176,000 sq ft of brand new Grade A space was transacted in Q2 2015, which not only reaffirms the importance that occupiers apply to high specification space but also that the developers who were confident in proceeding with speculative developments are being rewarded.  Not only are these new buildings securing high profile tenants (and in the case of Virgin Atlantic taking Leonardo House in Crawley before completion) they are commanding rents that exceed pre-crash levels such as Maersk at Point in Maidenhead who are paying £35.00 per sq ft on the top floors.”

Simon Bland, head of national markets added: “The vindication in relation to speculative development is also being experienced in the investment market. Where newly developed buildings have been traded they are setting new benchmark yields for this cycle at sub 5.25%.”

The quarter was dominated by deals in the sub 20,000 sq ft category; 58% of deals that completed were in the 5,000 sq ft to 20,000 sq ft bracket, with only one deal over 50,000 sq ft agreed.

Strutt & Parker cited that only 68,000 sq ft of newly developed space has been delivered so far in 2015 however just over 1m sq ft is due to be completed by the end of Q4 2015. They also highlight that the appetite for speculative development in key South East towns remains strong with Brockton and Landid announcing plans to develop 100,000 sq ft. at 1 Brunel Way in Slough and Rockspring and Clearbell with Exton Estates undertaking The Bower Building a scheme of 140,000 sq ft. at Stockley Park.

Strutt & Parker’s research indicates strong levels of identified demand for this new stock with demand levels for the South East reaching 5.7m sq ft, a 16% increase on the first quarter of 2015.  The amount of space currently under offer is approximately 785,000 sq ft.

Ed Smith concluded: “With a substantial amount of space already under offer we anticipate a strong performance in Q3 and for more South East locations to achieve rents that surpass the previous cycle.”