UK buyers inked more deals than foreign investors in the South East office market in Q1 2017, accounting for 87% of investment turnover, according to new data from Knight Frank.

This figure is a reversal from 2016, when overseas buyers accounted for 51% of investment turnover. Investment volumes reached £540M in Q1, 7.5% above the 10-year quarterly average for the region. With limited new stock on the market, much of this has been made up of hangover deals from Q4 and off-market transactions.

UK councils continue to be among the most active for income deals, in a lot of cases pricing out the overseas market due to their comparatively low cost of capital. Permitted development buyers have continued their dominance in certain markets and UK funds have made a return with a focus on prime multi-let assets with reversionary potential in established markets such as Brighton, Watford and Maidenhead.

Private equity buyers continue to seek attractive returns, but are frustrated by limited opportunities in the market. Overseas buyers are expected to remain active across the South East office market through the year.

Letting activity in the first quarter of this year was steady, with overall office take-up in the South East just short of the 10-year quarterly average.

Knight Frank head of national offices Emma Goodford said smaller requirements predominate in the South East, but 11 medium-range deals (20K to 50K SF) completed in Q1.

"This is the highest quarterly total within this size band since 2014. Development completions in the M25 will peak in 2017, increasing the vacancy rate. Despite this, vacancy levels are not anticipated to reach the long-term average and will begin to decrease by the turn of the year," Goodford said.