South East: CBRE predicts year of two halves for office market

CBRE, the leading commercial property and real estate services adviser, has reported that take up in the South East for 2016 was only 3% below the five-year average, and rents have held up.  CBRE notes too that approximately 1.7m sq ft of new development is expected to complete in the wider South East region in 2017. A large amount of this is due in the first quarter but despite an anticipated slowdown in new development activity later in the year, CBRE foresees the market picking up in the second half.

Luke Hacking, head of South East office agency at CBRE, said: “Despite the economic turbulence of the past six months and 25% fewer deals in 2016 than 2015, the overall take-up was surprising and encouraging at only just behind the five-year average. 2017 will see continued political uncertainty and while take-up over the first half may be slow we predict a year of two halves with H2 gathering momentum.”

Nearly 2.8m sq ft of office space was taken up in the South East office markets in 2016 (in units of 10,000 sq ft or more), 3% down on the five-year average and around 14% down on 2015. There was some 660,000 sq ft under offer at the end of 2016 which was just under 6% below the level at the end of 2015. 

There were, however, 25% fewer transactions over 10,000 sq ft  in 2016 than in 2015, and there were only 10 transactions in the 30,000 to 50,000 sq ft size bracket compared with 17 in 2015. On the other hand, the number of deals in the 50,000 sq ft and above size bracket was up from 11 to 12 and accounted for 39% of the year’s take-up.

In select locations, 2016 saw record rents being set across the wider South East, examples being £37.50 per sq ft in Maidenhead, £34.00 per sq ft  in Croydon and, £27.50 per sq ft in Farnborough.

Credit: CoStar