December 16, 2014
Take-up in the central London office market is expected to hit its highest level since 2010, bolstered by a massive increase in demand among firms in the Professional and the tech, creative and new media sectors. These sectors are forecast to employ a further 110,000 people across Westminster, the City of London, Southwark and Tower Hamlets in the next decade, which is expected to further increase demand. According to DTZ’s latest Central London Offices Update overall office take-up is expected to reach 14.5m sq ft in 2014; up by 30 per cent on the five year average and at the highest level recorded since 2010. However , availability has continued to fall, with just 9.5m sq ft of office space currently remaining – the lowest level since 2001. This restricted availability is leading to a higher level of competition for space which is driving up rents. Central office take-up reached 901,000 sq ft in November, taking the year-to-date total to 12.6m sq ft. The figure is up 21 per cent on the same period last year and higher than the annual total for four out of the past five years.
There has been an increase of several percentage points on the five year average among firms in the Professional and the Tech, Creative & New Media sectors at 25 per cent and 24 per cent respectively.
While the Insurance & Finance sector has taken its largest share of office space for two years at 25 per cent, companies within this sector continue to pay the highest rents, paying six of the Top 10 Central London rents in 2014. The remainder is being paid by serviced office providers and oil companies for offices in the West End.
Some of the most notable deals in the professional sector include EY which has rented 205,000 sq ft of newly developed space at 25 Churchill Place in Canary Wharf and international law firm Mishcon de Reya, which recently acquired 116,000 sq ft at the refurbished Midtown office, Africa House.
Amazon did the largest deal of the year within the Tech, Creative & New Media sector – with 430,000 sq ft at Principal Place, close to Silicon Roundabout. Omnicom signed 368,000 sq ft South of the river at Bankside 2 and 3. Google and Havas signed on 160,000 sq ft each, at 6 and 3 Pancras Square in Kings Cross.
In the Insurance & Finance sector – M&G pre-let 323,000 sq ft at 120 Fenchurch Street and Société Générale took 280,000 sq ft a 1 Bank Street in Canary Wharf. The last few months have seen record rents achieved in the City of London at The Leadenhall Building and in Kings Cross, while the West End looks set to have its record broken by oil giant Trafigura.
Sophy Moffat, DTZ’s Senior Analyst for Central London, says: “The proportion of occupied offices in central London has not been higher since 2000, and many landlords believe their pipelines are full enough for the time being. Although not at record-breaking levels, take-up is high. While availability remains restricted the market will continue to shift in favour of the landlord.
“The Leadenhall Building, on which DTZ is instructed, has achieved record breaking rents for the City of London this year. We have also seen record rents at King’s Cross, where we act for the development and asset manager Argent.
“In the West End, global oil giant Trafigura is in advanced talks to secure prime space at 30 Berkeley Square at a price rumoured to be close to £150 per sq ft, which would set the record for the highest office rent ever paid in the UK.”