Occupiers in Central London’s office market seeking more value-for-money are driving leasing activity as the balance of power remains in their favor, according to research published today by global property consultants Cushman & Wakefield.
Central London take-up reached over 2.1 million ft² (approx. 195,000 m²) in Q1 2013. This is significantly above take-up activity in Q1 2012, when 1.5 million ft² (approx. 140,000m²) was let, and for the second consecutive quarter is on a par with the 5-year quarterly average.
Google’s purchase of 800,000 ft² (approx. 74,300 m²) of space at King’s Cross Central, for its new UK headquarters, boosted overall take-up and accounted for more than a third of space let during the quarter. Consequently, this deal contributed significantly to the West End’s Q1 2013 total take-up figure of just under 1.3 million ft² (approx.121,000 m²); the area’s strongest start to the year since 2000 and more than 75% ahead of activity in Q1 2012.
The media and technology sector once again dominated West End activity and was responsible for 63% of transactions completed.
Guy Taylor, Head of West End Office Agency at Cushman & Wakefield, said: “Occupiers are increasingly broadening their search criteria in an effort to find perceived good value office accommodation. Larger occupiers, in particular, are taking the opportunity to drive a hard bargain and secure maximum value from landlords.”
In the City and Docklands, 815,000 ft² (approx. 76,000 m²) of space was let in Q1 2013, which is a 13% uplift on Q1 2012. Occupiers in the City are using the opportunity to negotiate value from landlords and City buildings such as Cannon Place and Heron Tower, which have been on the market for some time, are now beginning to see increased leasing activity.
The most active market in the City is still the insurance market accounting for 18% of lettings, with both Liberty Mutual (51,000 ft²) and Liberty Syndicate (66,321 ft²) recently signing at 20 Fenchurch Street.
Under offer market ‘buoyant’
Central London’s deal pipeline looks promising with around 1.9 million ft² (approx. 176,500 m²) currently under offer. This is broadly in line with the five-year quarterly average of 2 million ft² (approx. 186,000 m²).
The City leads the way for space under offer by a considerable margin with circa 1.6 million ft² (approx. 148,600 m²) under offer compared to the West End’s 345,000 ft² (approx. 32,000 m²). Under offer volumes in the City are 40% ahead of the five-year quarterly average of around 1.1 million ft². In contrast, space under offer in the West End is 60% below the five-year quarterly average of 720,000 ft² (approx. 66,900 m²) but this is primarily due to the Google transaction which has now completed.
Andrew Parker, Head of City Agency at Cushman & Wakefield, said: “The significant amount of space currently under offer in the City market is partly driven by landlords of buildings who have incurred substantial letting voids, being prepared to offer very attractive financial terms to secure prospective occupiers.”