Activity in the London office market rebounded in the first quarter of 2021 following five consecutive quarters of declines, central London office analysis from real estate advisor Avison Young shows.
Some 1.3 million square feet of office space was taken up in Q1 2021, a 48% increase from Q4 2020.
While take-up was 46% below the 10-year quarterly average, over half of all activity took place in March, which points to an upwards trajectory in the coming months.
Alasdair Gurry, director of City Office Agency, Avison Young, said: “Encouraged by the smooth vaccine rollout and relaxation of lockdown restrictions, there is an increasing sense of positivity in the London office market, reflected in the highest take-up total since 2020 Q1.
“Buoyed by increased levels of office occupancy and the shift in appetite to return to the office, we are likely to see rapid increases in market activity in the months ahead.
“In contrast to the prevailing view a year ago of the ‘death of the office’, this provides yet more cause for optimism in the long-term future of the Central London office market as it begins its recovery.”
Large deals drove this increase, with 16 deals over 20,000 square feet accounting for 62% of quarterly take-up in Central London.
Construction has slowed down in the first quarter of 2021.
There were only seven developments that completed over the quarter, totalling 465,000 square feet. This was much lower than the 2.3 million square feet that completed in Q4 2020 and the 1.8 million Q3 2020.
Chris Gore, principal, Central London Investment, Avison Young, said: “Considering that we were under lockdown for the entire period, it is no surprise that the first quarter of the year was relatively quiet.
“With investors still impeded by the luxury of actually being able to inspect a building, there was relatively little supply released to the market.
“Nonetheless, we continue to see investment for well-located, well-let buildings, such as CBRE GI’s purchase of Atlantic House from Deka Immobilien for £265m, which was the largest deal of the quarter.
“We anticipate activity to increase across the coming months, driven by an improvement in occupier fundamentals and investor sentiment. In fact, we are already starting to see an uptick in new investment sales being launched to the market and we expect this to continue throughout the year.”