UK Big 6 Report
With the pandemic impacting on everyday life for much of 2020, and office-based workers largely working from home, it was no surprise that occupiers delayed decisions. But how did this impact on the Big 6 leasing and investment markets?
Big 6 leasing activity was muted to say the least, with activity for the full year reaching just under 3.1 million sq ft, which was virtually on a par with the lowest year on record, back in 2011.
Encouragingly, quarter-on-quarter activity increased in the second half of 2020, from the low of just 258,000 sq ft back in Q2. This was not enough to prevent H2 2020 recording the lowest 6-monthly volumes since H1 2011, at just under 1.5 million sq ft. This was over 40% down on the same period on 2019 and more than a third down on the 10-year H2 average.
The level of supply on the market continued to rise, due to a combination of the subdued leasing market and increasing volumes of both new and second-hand space being marketed. The vacancy rate moved up to 5.1% at year-end, which remained marginally below the 5-year average of 5.3% and still some way under the 10-year average of 7.4%.
Despite the pandemic, prime rental growth was evident across the majority of Big 6 markets and prime rents across the board are at peak levels. Occupiers are willing to pay record rents in order to secure the best space.
Investment across the UK has recovered relatively well from a period of extremely low activity throughout the spring and early summer of 2020, when the economy was in an enforced state of hibernation due to the COVID-19 pandemic and resulting lockdown measures, and many practicalities involved in transactional activity were prohibited. Overall investment volumes into the Big 6 totalled £816m in the second half of 2020, and while this represents a reduction of 35% against the equivalent period last year, it is an almost fourfold increase on the first half of the year, when just £219m was invested. In fact, the fourth quarter alone saw £474m of investment, 47% higher than the fourth quarter of 2019.
Read more in our H2 2020 Big 6 office market report.