February 9, 2018
A new report from Knight Frank claims that activity in the office market in London increased sharply last year, which the property adviser said was driven largely by growing demand from the UK’s burgeoning tech sector. The report said office leasing activity in central London hit 13.84 million sq ft last year, more than 2 million sq ft than in 2016. Knight Frank said it had seen ‘extraordinary demand’ for London offices from the Technology, Media and Telecommunications (TMT) sector. However, the report also claims that there is now a lack of quality office space supply because, despite the fact that more than 259 development schemes are under construction in Central London, 187 are residential, and of the remaining 72 offering commercial space, only two-thirds are available to lease, with many of them already pre-let to office tenants.
Furthermore, the development pipeline has meant that more than a quarter of these buildings will not be available until 2020, creating a short-term squeeze for any companies needing to move in the next two years.
Stephen Clifton, head of central London at Knight Frank, said: “Central London’s office market witnessed a high volume of activity in 2017 with record take-up by TMT firms. Whilst this shows tremendous confidence in London after the EU referendum, supply also peaked in 2017 and is now in the process of falling. This implies that going forward there will be increased demands for pre-lets as there is a lack of quality supply in the pipeline, and this will put pressure on developers, landlords and operators in the market.
“It is clear that occupiers are increasingly considering their real estate strategy a core part of their business decision-making process, whether that be the design, co-working space or amenities. As such, landlords must adapt to accommodate occupier requirements and ensure that the central London office market continues to flourish.”