Around £5bn was spent on London office assets over the first three months of the year, making it the largest amount transacted in a single quarter since Q3 2018, according to real estate firm Avison Young.

In its Central London Office Analysis, Avison Young said Q1 investment was 40% up on the long-term quarterly average and more than double the amount spent in the same quarter last year.

Avison Young said although occupier activity fell 8.7% against the long-term average for Q1 letting volumes, activity was 60% ahead of the amount of space let in the equivalent period of 2021.

Chris Gore, principal, Central London investment at Avison Young, said: “The increasing optimism we saw across last year led to the best opening quarter since 2017 in terms of overall spending on London offices.

“However, in spite of this bumper start to the year, it would be foolish not to sound a note of caution in the current macro environment. In particular, inflation and further interest rate rises could have a significant impact on investors considering development projects or who need financing to compete at current pricing levels.”

The research found the City was the most active submarket in London for quarterly investment, where the largest individual deal of the period was the NPS’s purchase of the UBS building at 5 Broadgate for £1.2bn.

Overseas investors invested £3.7bn in the period, while investment from UK property companies more than doubled from the previous quarter’s £474.1m to £1.02bn, according to the research.

Stuart Commins, principal, occupier advisory, at Avison Young, said: “There is a pervading sense in London that more and more occupiers appreciate the important influence of the office environment when it comes to business performance, employee wellbeing and the retention or attraction of talent. As a result, the continued return of the London workforce has led to increased volumes of office requirements.

“Now more than ever, occupiers are placing significant value on best-in-class building amenities and specifications, particularly those that help support positive social and environmental impacts. Subsequently, in Q1 2022 nine out of the 10 largest deals were for new-build or grade-A spaces: precipitating a 1% increase in prime rental tone across London against Q4 2021.”