Quarterly Review: Q2 2022

Quarterly Review: Q2 2022

Economic activity has weakened, with the latest PMIs suggesting the euro-zone has fallen into recession, with the UK set to follow suit. However, there have been growing signs that we are at the turning point in global inflation.

Central London office occupier activity had a good first half of the year. Strong demand however failed to prevent a further rise in availability, and the office supply pipeline remains full with next year’s total completions estimated to be the highest since 2003.

Even as the economy has slowed, industrial demand in the UK has so far held up. The boost to take-up primarily occurred outside the South-East and London. However, that reflects a lack of supply rather than demand and developers are now responding to tight market conditions. Speculative space under construction is at its highest since at least 2012.

In contrast to Central London, regional office markets have seen a slowdown in take-up in recent months. And unless activity picks-up markedly in the second half of the year 2022 is on track to see a lower level of take-up than in 2020. But regional industrial occupier activity was robust and accounted for over 80% of total UK industrial takeup in Q2.

Total UK investment volumes dropped back for the second quarter in a row in Q2, and office investment was at its lowest since 2020 Q4, driven by a sharp fall in Central London office investment. In contrast, Rest of UK office investment recovered from a very weak Q1 to reach the largest quarterly figure since the end of 2018.