May 27, 2016
Canary Wharf has outperformed the Central London office market during the past 12 months, with rental growth reaching 26.7 percent, ahead of Mayfair and St James’. It seems Canary Wharf’s high quality purpose built space, coupled with its relative affordability when compared to the rest of London, has helped attract significant deals in recent months. The most notable deal during Q1 was Thomson Reuters take up of 300,000sq ft in St Martin’s 5 Canada Square. Faisal Durrani, Cluttons head of research, explained, “It was only a matter of time before the area began to draw in occupiers, particularly from the City and City fringes. It’s a market that has undersold itself and its full potential is yet to be realised but we may be approaching a significant turning point in its attractiveness. In recent months, the Central London market has experienced Brexit nervousness and general settling of the market but Canary Wharf has bucked this trend.”
He continued: “The prospect of a Brexit and a sense that the market may be peaking have together slowed the rate of rental growth across the wider Central London markedly.
“This, combined with an imminent and seasonal summer slowdown suggests that we are in for a few more months of minimal rental growth. Once the Brexit storm has passed, there is the potential for activity levels to normalise, assuming the status quo prevails on 23 June.”
Cluttons research shows Central London Q1 take up was just below the previous quarter and the occupier market is noticeably quieter in the lead up to the referendum.
Ralph Pearson, Cluttons head of commercial agency, commented, “The urgency has certainly gone out of the market but with a very low vacancy rate and robust occupier base, the prospects are for a steady rather than declining market profile. In the medium-term, this is for the best as recent rental performance is neither sustainable nor affordable for many occupiers.”
The vacancy rate throughout prime central London is 4.4 percent, close to an all-time low.
Other key office occupier deals throughout Q1 2016 included The Financial Times/Nikkei taking 137,000sq ft in Obayashi Corporation’s Bracken House (City and New Look taking 120,000sq ft at Argent’s Building R7 (Kings Cross).
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