London office demand was stable in Q1 as occupier take-up reached just over 3.1m sq ft. This quarter marked the highest number of lettings since before the pandemic though and activity was focused in the smaller size bands.
Tenants are now voting with their feet for best-in-class space, with ESG, namely sustainability, at the forefront of decision making. Increasingly, what occupiers demand from an office is influenced more by subjective business-linked or staff retention requirements than overall cost.
Two consecutive quarters of above-average demand contributed to another quarterly fall in availability in London, as the rate declined by 0.6%-pts, reaching 8.1% in Q1.
Headwinds to construction activity remain as construction costs over 2022 are anticipated to be 5% above the expected level at the end of last year.
Investment amounted to just under £3.5bn in Q1, an increase of 13% on Q4 and 18% above the 5-year quarterly average. Overseas investment returned with a bang, shaking off the travel disruptions prevalent in the early stages of the year.