The Midtown specialist said lettings totalled 681,164 sq ft, which is 58% higher than the same period last year and more than any other first quarter since 2011.
“In the first quarter of 2016, the market was already experiencing a hiatus ahead of the EU referendum vote, but 12 months on, the beginning of this year has seen a more normalised environment,” says Jules Hind, leasing and development partner at Farebrother.
Three substantial deals drove the take-up of Midtown office space, with McKinsey & Company taking 97,000 sq ft at The Post Building; COS leasing 60,500 sq ft at 1 New Oxford Street; and ITV signing for 88,000 sq ft at 2 Waterhouse Square.
However, the strong take-up figures failed to match the level of new space coming on to the market. As a result, office space availability ticked up from 1.6m sq ft at the end of last year to 2.1m sq ft by the end of March.
Hind says he expects availability to fall back later this year because the increase during the first quarter was fuelled by the completion of major schemes that are likely to prove attractive to occupiers, including the 65,600 sq ft Cursitor Building and the 98,700 sq ft 28 Chancery Lane.
“Given that there is sustained demand for this type of product, we would expect availability to reduce as the year continues,” Hind says.
In contrast to the busy lettings market, investment activity was relatively subdued during the first quarter. With £625m of deals transacted, Q1 was 44% down on the final quarter of 2016 and slightly below the long-term quarterly average.
“The current political and economic scene within the UK and globally makes it a difficult market to read, but there is still strong demand for the right product and prime yields remain at circa 4.25%,” says Farebrother investment partner Alastair Hilton.