LONDON OFFICE MARKET Q4 2007 MARKET SUMMARY
All below information is supplied by Co Star market research
In the final quarter of 2007, Central London markets were characterised by low level takeup in The City and strong demand for the West End and Midtown.
City Q4 2007
The biggest impact of the slow down in demand in the fourth quarter was experienced by the City. Take up in the EC postcodes fell below 1 million sq ft for the first time in two years and substantially below the three year average of 1.6 million.
The real story on the demand side was that large institutional requirements previously being driven by expansion have been put on hold. This does not bode well for the three million or so square feet in the development pipeline due for delivery this year. Current availability at nearly 15 million sq ft appears to be at its lowest level in this cycle and rose slightly in the fourth quarter. In the face of slowing demand and increasing supply, rents are expected to fall back in 2008.
Midtown Q4 2007
In contrast, the WC postcodes delivered a strong fourth quarter with take up 25% higher than quarter 3. With just over a million sq ft available, space in the WC postcodes is at a premium. The largest new space available is 106,000 sq ft at the refurbished Centrium building on Aldwych. Highlighting the potential shortage of Grade A space, the next largest available is only 52,000 sq ft in Red Lion Square.
West End Q4 2007
Thus far, the West End market has shrugged off the problems evident elsewhere. Take up in the fourth quarter was 1.1 million square feet – just about the average for the last three years and marginally up on quarter three. Current availability stands at 2.7 million sq ft and has stayed at roughly that level all year. Given a continuing shortage of high quality space and solid demand, rents are expected to rise in the West End by around 5% in 2008.
Fringe Market Q4 2007
Docklands has provided a fairly volatile market, based as it is upon the development of new space. Quarter 4 of 2007 saw very few deals of any substance. Unlike Docklands, E1 suffers from a shortage in the availability of high quality space, however one exception is the impressive 64,000 sq ft Bishops Square. South Bank has seen a significant amount of construction activity in this cycle improving both the quality and the critical mass of the market. However, the fourth quarter saw the worst outturn for two years, with take up less than 200,000 sq ft being driven largely by a shortage in supply,availability is currently at its lowest point since 2001.
The postcodes along the northern fringe – N1 & NW1 – saw a decent level of market activity following a poor third quarter.