CBRE data shows that creative industries continue to play an active role in the market, accounting for 23% of take-up in the first three months of 2019. Despite a fall of 46% on the previous Q1, creative industries were on par with business services who were responsible for 25% of take-up. As is often the case, deals of a smaller nature (10,000 – 30,000 sq ft size bracket) dominated in Q1 accounting for three-quarters of take-up.
With only three deals above 30,000 sq ft so far in 2019, the average deal size is 20,000 sq ft. Serviced office operators helped boost this average, with deals ranging between 20,000 sq ft and 35,000 sq ft.
Grade A supply continues to be severely constrained with just 3.1 million sq ft available at the end of Q1. This is the lowest Grade A supply has been since 2015 and 25% below the five year quarterly average.
Limited new build developments coming to the market have meant developers are now looking to extensively refurbish older office stock, with a third of completions in 2019 refurbs.
Take-up across the Thames Valley region totalled 393,653 sq ft during Q1 2019. A solid start to the year, this is marginally up on the same period in 2018 and in line with the five year quarterly average, says CBRE. A total of 26 deals completed in Q1 with the average deal size just below 20,000 sq ft. There is currently 351,014 sq ft of office space under offer across the Thames Valley for space over 10,000 sq ft, the majority of demand in the sub 20,000 sq ft size band.
Total availability at the end of Q1 2019 was 5.7 million sq ft, two thirds of the five-year quarterly average and just under a million sq ft less than at the end of 2018. Grade A supply at the end of Q1 stood at 2.3 million sq ft which is 34% below the five-year average.
The M25 North has historically seen more limited transactional activity on units over 10,000 sq ft compared to the Thames Valley. The first three months of 2019 saw a total of 97,279 sq ft transacted. A strong start to the year, this level of take-up is 42% higher than the previous year’s opening quarter.
However, this remains 14% below the five-year average quarterly total. Lower levels of take-up in this submarket are primarily due to a lack of availability of high-quality built stock.
There were five transactions over 10,000 sq ft in Q1. Overall supply of office space in the region at the end of Q1 2019 totalled just 943,361 sq ft, the lowest on record and 43% below the five year quarterly average. The level of Grade A supply at the end of Q1 2019 stood at 263,684 sq ft. This was a 67% increase from the same period in 2018.
Take-up in the M25 South region in Q1 2019 totalled 28,030 sq ft, 65% below the five-year quarterly average. Availability levels in the M25 South submarket recovered slightly at the end of 2018, following a period of sharp decline (partly due to withdrawal of space for alternative uses including, but not exclusively, residential).
However, supply dropped once again in the first quarter of 2019 to total just shy of 1.9 million sq ft, 13% below that which was available at the end of 2018. Despite this, this level of supply remains in line with the five-year average. Grade A office supply totalled 513,545 sq ft at the end of Q1. This is 7% higher than the 5-year average, prime space is letting at a good rate.