Demand for offices across the South East and Greater London markets rose in the first quarter to the highest level since 2008, according to Knight Frank.
In this period leasing volumes totalled 1.2 million sq ft which was 39% higher than the preceding quarter.
The majority of this demand - 86% - was focused on new grade A office buildings, higher than the 80% level recorded throughout 2024.
Knight Frank flagged that asset owners were benefiting from a supportive mix of supply and demand factors.
Across these markets the development pipeline remains limited at just over 1.8 million sq ft of speculative office space under construction.
For perspective, there are 5.2 million sq ft of current active office space requirements and 13.6 million sq ft of lease events during the next three years.
The South East and Greater London markets recorded £259m of investment transactions in the first quarter and this was dominated by smaller deals.
The average deal size during this quarter was £10.3m.
“Investors are slowly buying into the demand and prime rental growth story in new office buildings, which continue to attract blue-chip tenants on strong lease terms,” said Simon Rickards, head of national offices capital markets at Knight Frank.
“Investment activity continues to hinge on pricing confidence and although prime office values have already bottomed out, the lack of motivated sellers means that deal volumes remain subdued.
“However, property companies are increasingly recognising the current window of opportunity and many are eyeing value add deals given larger upside potential because of depressed values and shortage of modern office stock.”
