Take-up in the Western Corridor office market totalled 720,000 sq ft in the third quarter of this year, up 56% on Q3 2017, according to data from JLL.
This boost means the total amount of space transacted in the first three quarters of 2018 has risen to 1.69m sq ft, a 39% increase on the previous year.
“We are forecasting take-up will exceed the 2017 figure and we anticipate an end-year figure of more than 2.1m sq ft,” said James Finnis, head of South East office agency at JLL.
He added: “With demand continuing to take the best space and the replacement rate falling below 1% of total stock there is a growing future supply risk.
“Our net absorption forecasts are showing a pinch point coming – focused on 2020 and 2021.”
The Western Corridor’s investment market also saw a marked quarter-on-quarter increase, with £780m transacted in Q3 2018, driving investment volumes for the year to £1.49bn.
A chunk of this was due to Brockton Capital and Landid’s sale of the remaining three assets in their joint venture portfolio to Spelthorne Borough Council for £285m.
The average deal size also increased from 15,500 sq ft in Q3 2017 to 38,000 sq ft in Q3 2018 due to several large transactions. More than 95% of transactions were for grade A space.
Angus Minford, director of capital markets at JLL, said: “Echoing the trend currently being played out in the leasing sector, we are experiencing an acute lack of available prime product.
“While there is a significant wall of money targeted at the region, it remains a risk off-market and therefore it is the prime and core assets that are attracting attention, of which there is limited supply.
“We expect to see investment volumes exceed £2bn by the end of the year and this investor demand, along with sustained occupier interest, should encourage the next wave of speculative stock.”
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