Take-up across the South East office market totalled 542,000 sq ft in Q1 2020, down 23% on the five-year quarterly average but in line with the same quarter last year, reports Hollis Hockley.
The quarter saw 43 transactions, giving an average transaction size of 12,600 sq ft.
Hollis Hockley said take-up of Grade A dominated again, accounting for 82% transactions. Town centre transactions accounted for 68.7% of take-up by square footage, significantly ahead of the long term average (49.6%) against out of town.
While the Covid-19 business operational constraints came into effect in the second half of March, Hollis Hockley said this does not appear to have adversely affected leasing commitments in the month with 215,000 sq ft of lease completions.
Q1’s most significant transactions included:
Supply for the South East stands at 7.4m sq ft, representing an average vacancy rate across key selected office centres in the Hollis Hockley survey area of just 8.7%, the lowest level for 15 years.
Rhodri Shaw, partner at Hollis Hockley, said: ‘Whilst take up in Q1 2020 was in line with Q1 2019, it was down on the long term quarterly average. At this stage, it is not yet clear how take up will be adversely effected by the wider Covid-19 situation in the coming quarters. We are aware of a few transactions in the sub 15,000 sq ft size range that have been delayed. It appears larger corporate occupiers already under offer on taking new space are proceeding. However, the situation is fluid and may change."
Jeremy Metcalfe, partner at Hollis Hockley, added: "It is clear that in a time of uncertainty and with a reduction in viewings at present, it is likely there will be a time lag and a gap in leasing transactions completing in 2-3 months time. Having said this, the South East market is resilient and predominantly lease event driven. The average vacancy rate is historically low, if speculative completions are delayed this year as a result of Covid-19 we could see a very tight supply position in Q4 2020/Q1 2021, which should encourage occupiers to commit if they want to secure best in class space "