Signs of spring in London office market
The London office market is showing signs of increased occupier demand, according to the latest figures from Cushman & Wakefield. The amount of office space across London under offer, where tenants have agreed terms with a landlord but have not yet signed a lease, jumped by 16.3% in Q1 2012, compared to the previous quarter.
The City & Docklands market witnessed the largest increase, with 1.18m sq ft of office space under offer (a total of 174 deals), up 54.3% on Q4 2011 (0.76m sq ft). Companies which have gone under offer include; Skype at PRUPIM’s Waterhouse Square in Holborn: Odgers Berndtson at 20 Cannon Street: and JLT at the St Botolph Building in the City.
Large companies which had been considering relocating, for example Schroders, had previously put their plans on hold due to economic uncertainty, but the last three months have shown signs of returning occupier confidence. Active demand in Q1 2012 rose by 10% in the West End, to 3.9m sq ft, and by 6% in the City & Docklands, to 4.7 m sq ft. Across the whole of London, demand was up by almost 8% on the previous quarter.
New office submarkets in London such as Clerkenwell, Farringdon, Southwark, King’s Cross and Shoreditch are growing in popularity as companies focus on cost-effective buildings to secure the right office space. Supply is edging downwards in certain submarkets against a backdrop of low levels of speculative development activity due to be delivered between now and 2015.
In the City & Docklands, vacancy rates have stayed around the same, at 8.5%, and prime rents have remained unchanged at GBP55.00 per sq ft. The same is true in the West End, with vacancy rates at 4.7% and prime rents at GBP102.50 per sq ft.
James Young (pictured), Head of Cushman & Wakefield London Offices, says: “Although take-up continues to be restrained, there are the first signs of returning demand from occupiers. There have been several large pre-lets during Q1 this year, such as UBM at 240 Blackfriars Road on the South Bank and Burberry at 1a Page Street in Westminster. With economic conditions likely to remain tough, we expect to see more businesses pre-letting space in 2012. The rising sub-markets are well-placed to benefit from occupiers becoming less tied to location and more focused on cost-efficient offices.”