Central London take-up in the third quarter rose to 2.6 million ft² (240,000 m²), up from a low of 1.1 million ft² in the first quarter, according to new research from CB Richard Ellis. In addition, the amount of space under offer rose to 2.4 million ft² from 1.6 million ft² in the previous quarter. Available office space fell by nearly 1.5 million sq ft during the third quarter, which took supply at the end of the quarter to 19.9 million ft². Reflecting this trend, the vacancy rate fell to 7.2% from 7.7% in the second quarter.
Kevin McCauley, Head of Central London Research, at CB Richard Ellis said: "The last three months has seen a marked improvement in both leasing activity and sentiment in the Central London office market, particularly in the City.
"In the City take-up in Q3 was 1.5 million ft², more than double the previous quarter's total and well above the long-term average of 1.2 million ft². This was the strongest quarter since 2007. The amount of space under offer remains above 1 million ft², which augers well for future take-up over the next few months.
"The improvement in Central London leasing activity was largely down to the City which saw a number of significant deals such as Nomura's acquisition of 491,000 ft² at Watermark Place and News International with 186,000 ft² at 3 Thomas Moore Square. On the back of this strong demand, the options for large occupiers looking for new space are becoming increasingly limited."
There was also increased activity in the Central London investment market over the last quarter. Central London investment turnover rose sharply to £2.7 billion (approx. 2.95 bln.)taking turnover for the year to date to £4.9 billion.
Overseas investors accounted for 82% of Central London transactions during the third quarter. This is the largest recorded share of investment by foreign investors in the Central London market. As a result of Blackrock's acquisition of a 50% stake in the Broadgate estate, North American investors were the most active across the Central London market and accounted for 47% of total investment. German investors, with 13% of investment, were very active again after a quiet second quarter.
Kevin McCauley, continued: "Investment turnover in the City, boosted by the Broadgate deal, reached £1.6 billion, which is nearly twice the previous quarter's level. The strong performance over the quarter took total transactions for the year to £2.6 billion, which is an improvement on the £2.4 billion recorded for the same period last year. Reflecting the Central London trend, overseas investors were very active and accounted for 90% of all City investment. North American investors accounted for the vast majority of investment activity."
West End investment volumes showed a steady improvement from the previous quarter to rise to £879 million, which was an increase of 30 per cent. Overseas investors accounted for two-thirds of transactions with Far Eastern and Asian investors the most active, followed by North American and then Middle Eastern investors.
Source: FD / CBRE