(Commonwealth) _ In the second half of 2023, the Greater London and South East office market experienced a noteworthy resurgence in leasing activity, registering a total take-up of 1.75 million sq ft. This marked a substantial 93% increase compared to the total recorded in the first half of 2023, representing the highest take-up in the second half since 2018, as reported by international real estate advisor Savills. Quarterly data for Q4 2023 showcased impressive performance, with a total take-up of 1.13 million sq ft. This figure surpassed several benchmarks, including being the highest quarterly total since Q4 2018, a 23% increase over Q4 2022, a 16% rise over the Q4 five-year average, and a 7% improvement over the Q4 long-term average. The market exhibited a clear preference for Grade A standard spaces, constituting 69% of the overall take-up. Excluding corporate entities acquiring buildings for occupancy, the Grade A proportion surged to 79%. The positive shift in sentiment can be largely attributed to corporate occupiers gaining a clearer understanding of their workspace requirements, increased certainty regarding the macro-economic outlook, and a proactive approach to securing prime, Grade A offices well in advance of lease expiries due to the diminishing supply.
Among the notable deals in Q4 2023, Lonza secured a cleared site of 184,500 sq ft in Thames Valley Park, Reading, known as the Murdoch, Hutton, and Faraday buildings, for £35 million. Lonza’s plans include the development of a 400,000 sq ft office, research and development, and manufacturing facility at this location. Additionally, Wood Group leased 119,000 sq ft at 400 Longwater Avenue, Reading, while Air Products secured 78,000 sq ft at 1000 Hillswood Park, Chertsey. Andrew Willcock, the head of Greater London and South East office agency, comments on the positive trend in the market: “These figures underscore the improved sentiment in the Greater London and South East markets throughout 2023. Notably, there has been a surge in larger deals, with 16 transactions exceeding 20,000 sq ft recorded in Q4 2023. This uptick reflects the commitment of larger corporate occupiers securing space amid a tightening supply of Grade A offices. Anticipating this momentum to persist into 2024, we foresee robust demand for prime Grade A offices. A significant portion, 41%, of the development pipeline completed in 2023 or scheduled for completion in 2024 has already been leased during construction or is currently under offer. This bodes well for the anticipated substantial rental growth throughout 2024.”
Robert Pearson, the Director in the Greater London and South East Tenant Rep team, provides valuable insights into the changing dynamics among occupiers: “As businesses adapt to the evolving landscape, there is an ongoing process of navigating their space requirements. Additionally, the preference for Grade A spaces aligns with corporate objectives related to Environmental, Social, and Governance (ESG) credentials and commitments.” This underscores the strategic importance of Grade A offices in meeting the dual objectives of optimizing the workplace for employee engagement and satisfaction while aligning with broader corporate sustainability goals. The emphasis on ESG considerations reflects a growing awareness among businesses about the environmental and social impact of their real estate choices, emphasizing the integral role that Grade A spaces play in meeting both operational and sustainability objectives. As companies prioritize employee well-being and sustainable practices, Grade A spaces continue to emerge as a cornerstone in shaping the future of office environments in the Greater London and South East regions.
