The demand for office floor space in the Eastern M25 market edged up over the six months to Q1 2024 as there seems to be renewed interest for employees to return to the workplace. Requirements increased by 21% to 1.2m sq ft, with the demand for smaller suites reducing, whilst requirements for buildings above 10,000 sq ft were up by 59%.

This uptick in demand has however yet to feed through to take up, with leasing activity in 2023 down to just 1.1m sq ft, the lowest level of activity recorded in the Eastern M25 in the past 20 years. Take up has remained below trend levels since the start of the pandemic, averaging 1.4m sq ft per annum compared to a pre pandemic level of 2.5m sq ft in 2019.

The start of 2024 has also seen activity remain subdued but improving demand may see this alter in the coming months.

Supply has tightened, with a number of office buildings being withdrawn from the market pending repurposing. Overall supply across the Eastern M25 region is down to 6.7m sq ft, with more than 53% of this supply in the Docklands and East London markets. Grade A supply stands at 1.5m sq ft with more than 75% of this better quality found, once again, in East London and Docklands. The availability rate across the region stands at 7.4% and is now below the long run average availability rate, which stands at 7.9%.

Prime rents across the region have begun to slip and are now down by 5.8% over the six months to the end of Q1 2024, with 69% of locations monitored by the Glenny Rent Survey registering falls in values.

Most purchaser interest and activity in the office sector has been from a "climate stranded asset" perspective with developers and investors looking to capitalise on the high obsolescence levels factored into this sector with a view to re-purposing secondary, but sometimes modern, office assets for hotel, self storage, residential and industrial purposes.