Central London Property Market Review Q3 - Central London property take-up on the rise

Central London office take-up rose to 2.7m sq ft in the third quarter of 2011 - the strongest performance of the year to date, according to the latest Central London property market review from CBRE.

Almost all Central London markets recorded increases in take-up from the previous quarter, with the largest increase seen in the City, strengthening to 0.9m sq ft from 744,000 sq ft in Q2. The exception was the West End, which fell below 1m sq ft for the first time since Q3 2009 due to a large drop in newly completed space.

In spite of the better Q3 performance, take-up remained below the 10-year average of 2.9m sq ft and has been below this average for the last three quarters. The lack of demand from the banking and finance sector has been the primary explanation of this; the sector’s share of total take-up was 18 per cent in Q3 and 22 per cent for the first three quarters, which compares with an average of 29 per cent over the last 10 years and 41 per cent last year.

Adam Hetherington, Managing Director, Central London, said:

“While take-up has been generally weak throughout the year, the jump in leasing levels across almost all central London markets over the third quarter has been a positive sign. However, it’s clear that the London office market has not escaped the deterioration in economic conditions and the lack of confidence amongst businesses has meant that occupiers are more cautious about making real estate decisions.”

The amount of space under offer remains encouragingly high at 1.1m sq ft despite falling over the quarter and is on par with the long-term average. Both CMS McKenna and Aon are still under offer on circa 190,000 sq ft each, however, there is only one other unit over 50,000 sq ft under offer.

Just as the last quarter, prime rents were unchanged across all the Central London markets with City and West End prime rents staying at £55.00 per sq ft and £92.50 per sq ft respectively.
With only 1.7m sq ft scheduled for completion, this year is on course to be one of the lowest on record for development completions.

Central London investment volumes were £1.4bn for the third quarter, 42 per cent lower than the previous quarter; however, total investment for the first three quarters was £6.8bn which is £1bn ahead of the same period a year ago. The West End witnessed the two largest deals and four of the top ten, and at £0.8bn it accounted for 58 per cent of all Central London investments.

Following the trend of previous quarters UK investors again accounted for the majority of investment with 54 per cent of overall transactions. Northern American and Far Eastern investors followed with 15 percent and 14 per cent respectively.

Central London Property Market Review - Q3