Take-up in the M25 South East office market exceeded the 1 million sq ft barrier in Q2 06, a 20% increase from the Q1 06 level and the highest for 5 years, giving the strongest indication that the South East office market continues to recover, according to figures released today by Knight Frank. M25 Q2 06 take-up totalled 1,052,300 sq ft and letting activity was strong in each of the M25 quadrants.

The South West witnessed the most activity within the M25, accounting for 32% of all Q2 take-up. Take-up in the M4 totalled 296,534 sq ft; and in the M3, take-up totalled 369,594 sq ft, a 25% increase on the previous quarter. This level of take-up continues the decline in the vacancy rate from 8.4% in Q1 to 8.2% in Q2 06, its lowest level since Q1 05. The M4 vacancy rate fell from 10.2% to 9.8% in Q2 with availability totalling 6.2 million sq ft. The M3 vacancy rate rose from 9.5% to 10.3% during Q2 06.

Catherine Penman, head of research, Knight Frank said: "The increase in letting activity provides a positive indication that the market is recovering. This is in line with our forecasts which predicts the M25 vacancy rate to fall to 7.5% by March 2007."

Emma Goodford, head of national offices, Knight Frank said: "Strong take-up in Q2 is supported by a total of 920,000 sq ft that is currently under offer within the M25 office market, demonstrating the continued recovery and growing occupier confidence. Despite weight of money into the investment market, there is limited speculative funding activity which we expect will re-emerge in Q3 and Q4 in prime centres where Grade A stock is now scarce."

The figures in the report relate to the availability of built, up-and-ready office/B1 accommodation within the M25 market. Vacant premises and leased space which is being actively marketed are included. New developments and refurbishments are deemed to be available for statistical purposes upon achieving practical completion.

Knight Frank defines the M4 market as extending from Hammersmith, west to Newbury, incorporating Uxbridge and High Wycombe to the north and Staines and Bracknell to the south. Reading is also included. Existing building stock in the M4 market totals 62,392,070 sq ft.

Knight Frank defines the M3 market incorporates the main South West London boroughs and encompasses Leatherhead, Guildford and Basingstoke extending north to the M4 boundary described above. Farnborough