Strong demand for London offices (UK)

Take-up of Central London office space more than doubled in Q1 2010 compared to Q1 2009 (the low point of the market downturn), as the capital gained from steady growth in the global economy according to Knight Frank. Activity increased across London, particularly for the City. The Square Mile recorded its third consecutive quarter of above average take-up, as the Greek debt crisis failed to derail the rally in office demand. West End activity continued the trend of recovery established in previous quarters.

For Q2 2010, Knight Frank cautions that the UK General Election will probably lead to a brief slowdown in activity, as market participants wait for the period of political uncertainty to pass. If the incoming (or re-elected) government fails to convincingly address the issue of the budget deficit, Knight Frank anticipates that the slowdown period would last longer, possibly into Q3. However, by Q4 at the latest Knight Frank expects the office market to resume its recovery, as the new global economic cycle gathers momentum.


• City take-up was 2.2 m sq ft, compared to just 0.7 m sq ft in Q1 2009 – although that was the lowest quarter of the recession – and 2.2 m sq ft in Q4. The City has now recorded three consecutive quarters of take-up above the long-term average of 1.6 m sq ft per quarter
• Global financial firms, lawyers and insurers were major acquirers of space. In the last nine months Asia-Pacific financial firms taking space has been a recurring theme
• Supply fell below 10.6 m sq ft - the third consecutive quarter of falling availability in the Square Mile - having peaked at 13.4 m sq ft in Q2 09. The long-term average is 10.4 m sq ft
• City prime rents increased by 5.7% quarter-on-quarter to £46.50 per sq ft in Q1 10, as landlords responded to rising demand and reducing options for good quality space

• West End take-up at 1.3 m sq ft was more than double the 0.5 m sq ft recorded in Q1 2009, and above the long-term average of 1.2 m sq ft per quarter
• Media firms, public sector organisations, retailers, and recruitment consultants were active in the market.
• Supply fell to 7.9 m sq ft, having peaked in Q3 2009 at 9.2 m sq ft. The West End is entering the new cycle upswing with a comparatively low level of good quality space. New & refurbished availability is currently 1.7 m sq ft; which is equal to average annual take-up for this type of space
• West End prime rents increased for the first time since 2007, rising 11.5% to £72.50 per sq ft. In part this was over-correction being clawed back by the landlord. Also, more financial firms (which historically pay the highest rents in the West End) are looking for office space.

James Roberts, head of Central London research, Knight Frank said: "The last nine months have seen an encouraging level of activity in the London office market. In particular, Asia-Pacific financial firms have been expanding, reminding us that London is a global marketplace. The upcoming election will dampen demand in the next three to six months, but that is just near-term political turbulence. Rather like the 'Baghdad Bounce' of 2003 for equities, I see activity coming back once the political uncertainty is removed, as there is a head of steam behind demand."

Will Beardmore-Gray, head of City leasing, Knight Frank said: "City demand will probably slow marginally in the coming months, but I do not see this altering the long-term outlook. There is currently 4 m sq ft of new build supply in the City, and average take-up for new and refurbished space is 3.2 m sq ft per annum, so there is a mismatch between supply and demand. Current activity is mostly driven by lease events and obsolescence, but I am confident we will see more expansion-led demand before the year end."

Tim Robinson, head of West End leasing, Knight Frank said: "We have now seen two consecutive quarters in which take-up has exceeded the long-term average, which makes me confident the market has now moved into a new cycle. There are a number of new financial searches in th

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