Confidence in the London office market continues its upward trajectory in Q3 2018
A raft of large acquisitions in the Central London office market during the third quarter 2018 has driven office take-up in the capital to 9.2 million square feet so far this year, an increase of 9 percent on average levels, according to Cushman & Wakefield.
During the third quarter 2018, Central London office take up totaled 3.48 million square feet, including six transactions that were larger than 100,000 square feet; a number not surpassed since 2010. This takes the number of deals in excess of 100,000 square feet to 12 in 2018, above the long-term annual average.
At the same time supply levels continued to fall. There is now just 12.6 million square feet available to lease, reflecting a vacancy rate of 4.7 percent. The falling vacancy rate, along with a tightening development pipeline, ensured tenants’ interest in pre-letting office space has remained strong.
Prime headline rents in both the City and West End have remained stable at £67.50 per ($89.12) square foot and £110.00 ($145.23) per square foot, respectively.
More than two-thirds (62 percent) of Central London take-up in 2018 so far has been in new class A space, underlining the increased occupier demand for top-quality offices.
“The London office market is in rude health as we enter the final quarter of the year with plenty of ‘in principle’ deals scheduled to complete,” said Richard Howard, head of London leasing at Cushman & Wakefield. “Demand remains high and landlords and occupiers are really embracing the range of leasing models that are now available in our market. Media and tech occupiers continue to target London, accounting for 28 percent of take up this year in Central London, and we are still seeing confident activity amongst financial and banking occupiers, who have committed to 1.7 million square feet of office space in the capital thus far.”
Patrick Scanlon, head of U.K. offices insight at Cushman & Wakefield, added, “Major businesses have continued to commit their future to London despite Brexit uncertainty. So far this year, we have witnessed almost as many 100,000 square feet deals than in the whole of 2007; the peak of the last cycle. The next 12 months will present challenges for both landlords and occupiers, but there is little doubt that London will continue to play an important role for global business in the longer term.”