LONDON OFFICE TAKE-UP REBOUNDS AS MARKET STABILISES IN Q3 2016
2.9 million sq ft of prime London office space leased by companies in Q3 2016
Quarterly increase in take-up of 21 per cent
Prime rents in Central London remain unchanged
Availability increases for sixth consecutive quarter
Take-up of London office space rebounded in Q3 2016 after a weak second quarter, according to the latest MarketView from global real estate advisor, CBRE. During Q2 2016 heightened uncertainty, partly due to the pending referendum, saw take-up for London office space fall 22 per cent quarter-on-quarter to 2.4 million sq ft. In contrast, Q3 2016 saw a quarterly increase of 21 per cent, with a total of 2.9 million sq ft of office space acquired. Take-up was therefore close to the 10 year average of 3.1 million sq ft.
Take-up in the quarter was driven by two major deals, notably the letting of 467,300 sq ft at Battersea Power Station, and a 220,700 sq ft owner occupier acquisition at 33 Central, King William Street. The deal at Battersea Power Station meant that the creative sector represented the largest proportion of take up in the quarter; constituting 33 per cent of the total.
An increase in take-up coincided with an increase in availability for the sixth consecutive quarter driven principally by 534,000 sq ft of additional secondhand space. Consequently, availability rose by three per cent to stand at 13.7 million sq ft, yet remains six per cent behind the 10 year average of 14.5 million sq ft.
The amount of space under offer in Central London fell by 23 per cent over the course of Q3 to 3 million sq ft following the signing of these large transactions. However, the amount of space under offer remains above the 10 year average of 2.8 million sq ft and active demand in London remains high. At the end of Q3 2016, there were 14 requirements for space over 100,000 sq ft.
The message to take from recent market activity at Battersea Power Station and 33 Central is that occupiers are willing to look past short-term volatility in the market.
London remains open for business – unemployment in London is the lowest it has been for 30 years, there is a buoyant job market and it has one of the most diverse workforces in the world. Consequently, the capital remains at the forefront of occupier’s strategies looking to expand, and the creative and tech industries are becoming increasingly dominant, a trend I expect to continue.