Occupiers’ expansion plans fuel demand for Central London office space

Amazon to move to Foster & Partners’ designed development Principal Place

The already intense levels of competition for prime Central London office space look set to increase. New data by JLL reports that leasing figures in the Central London office market are set to top those reached in 2013, with City lettings showing potential to reach over 7 million sq ft for the second year in a row and the West End on track for 3.3 million sq ft by the close of 2014. Strong take-up in these markets, combined with a resurged market in the Docklands, will see Central London take-up figures on track to exceed last year’s total of 11 million sq ft. While consolidation and lease expiries have been main drivers up to now, a buoyant economy means occupiers expansion plans are bringing new requirements to the market. Amazon’s recent decision to take a 400,000 sq ft pre-let at mixed-used development Principal Place at Shoreditch, is an early example of this and it’s expected more occupiers will follow suit.

“Market activity is buoyant and with 2.3 million sq ft currently under offer in the City alone and we’re expecting a wave of activity before the year draws to a close,” said Neil Prime, head of Office Agency at JLL

“Pre-let activity has remained strong throughout the year and as a result the speculative development pipeline is looking increasingly thin as we move into next year.

The investment market for office space is also likely to see a surge of activity in Q4, with several large buildings currently on the market. Investment volumes currently stand at £9.8 billion, but by the end of the year turnover is expected to grow to over £15 billion.

Ben Burston, head of UK Offices Research at JLL said: “Buoyant GDP growth, rapid employment growth and the continued out-performance of London’s economy are supporting strong levels of leasing and investment activity across the Central London market.

“Unlike some other global markets where there is a disconnect between the strength of investor demand and leasing activity, our latest figures indicate that the London market is aligned with investor demand, underpinned by strong levels of take-up.

“The fact that growth demand is still to return to previous highs despite the current strength of employment bodes well for continued strong leasing activity into next year, but it will become increasingly difficult for occupiers to secure their desired office space given a lack of new supply.”