London Office Market Recovers - 50% Increase in Major West End Lettings
6 Jul, 2010, London
LONDON OFFICE MARKET RECOVERS - 50% INCREASE IN MAJOR LETTINGS IN WEST END
The London office market continues to improve with prime office rents likely to grow by more than 50% in the West End and by around 33% in the City, by the end of 2014, according to global property adviser Cushman & Wakefield. Active demand from all sectors, a rapidly dwindling amount of available quality space and a worrying dearth of offices being built will lead to increased competition amongst corporates looking to fix deals.
A total of 5.3 million sq ft of office space has been taken up across the key markets of the West End, City and Docklands so far this year. This is an increase of more than 150% year-on-year, with only 2.1 million sq ft of office space leased in Q1 and Q2 2009. However, Q2 2010 represented a quieter quarter than the previous one, with 2.1 million sq ft taken, compared to Q1?s 3.1 million sq ft.
Since January 2010 there has been a 50% increase in major lettings in the West End, with take-up to date - 1.91 million sq ft together with 700,000 sq ft currently under offer - more than that of the whole of last year. Cushman & Wakefield expects take-up in the West End to be between 2.75-3 million sq ft by the end of 2010. This would be a large increase on 2009 (1.90 million sq ft). Key deals in Q2 included Kleinwort Benson signing on 14 St George Street and GE taking The Ark, Hammersmith. Q2 has seen two pre-lets in the West End: CBRE at Henrietta House and Robert Walters at Slingsby Place.
Office lettings in the City and Docklands this year total 3.36 million sq ft, around 75%
that of the whole of last year and close to a three-fold increase year-on-year. Cushman &
Wakefield expects take-up in the City to be between 5-5.5 million sq ft by the end of 2010.
This compares to 4.46 million sq ft in 2009. Prominent lettings in Q2 2010 include Shell
signing on 40 Bank Street, Canary Wharf and Baker Tilly at Nexus Place, Farringdon.
The high number of office leases expiring or reaching a break option in the next few years will also increase pressure on occupiers to review property strategies. Cushman & Wakefield estimates that this will affect around 20 million sq ft of City office space, and 9 million sq ft of West End, between now and 2015. In the West End, demand is due to: leases expiring/ reaching a break option (48%); expansion (30%); and consolidation (22%).
James Young, Head of Cushman & Wakefield's City office, said: "This year has seen the City office market rebound strongly with leasing transactions increasing substantially and availability levels falling steeply. Occupiers are still cautious about sanctioning moves in the current economic climate, but they realise that the supply squeeze is going to lead to a lack of options, and so pre-lets will start making a return."
Guy Taylor, Head of West End Office Agency at Cushman & Wakefield, said: "The West
End office market turned a corner during the second half of 2009 with take-up leaping upwards.
As the recovery gains pace, we see rents climbing steeply and space growing increasingly
scarce. There will be more refurbishment of buildings as banks refuse to lend money on large
new office developments. As the market swings back in favour of landlords, corporates must move
quickly to secure competitive deals and incentive packages."