London Remains Strong
Chris Lewis, Head of Office Agency and Consultancy at DeVono Cresa, believes that London is and will still be a compelling place to locate and do business.
Pundits and analysts might have expected a commentary on the London office market in Q4 2017 to be full of stories of market decline, dearth of take up and a generally alarming mix of caution and pessimism. Given the 12 months that preceded, it would not be an unreasonable expectation. Whether the lens through which you look is focused on global or national markets, it is difficult to think of a more uncertain time. It is therefore a tribute to its position as a leading world city that the performance of London has remained so strong.
At a very local level, the impact of an unsettling election and very real concerns about Brexit has not generated the hiatus in activity that we might have expected. Supply of new space into the market has been measured with developers planning their delivery well. Put these two things together (strong take up and manageable supply of space) and the dynamics of the market remain strong.
Post Brexit, we have seen some important deals with the likes of Deutsche Bank, Credit Agricole, GAM, Wells Fargo and EBRD, with requirements from Citibank and Bank of America emerging. These are all positive and reflect the commercial reality of our time – resolution on Brexit is likely to be some 5 years away (when you build in transition) and as a result, businesses have to make a call now. Oh yes, and then there’s WeWork, who are rapidly becoming every developers best friend – they continue to amass a vast portfolio of space across London, responding to an insatiable demand from their clients for flexible, creative co-working space.
When you look at its geographical position as a springboard to world markets, consider the truly global population and the talent pool available – London remains a compelling place to locate and to do business. Whilst prime rents across central London have remained largely flat, reflecting the supply and demand equilibrium, average rents in some areas have shown some signs of weakness, but this is mostly due to tenant rationalisation and, as a result, second-hand space entering supply. The most likely trend to look out for in the New Year will be a growth in leasing incentives and rents beginning to reduce in most markets. There’s no doubt that in these times, our role as real estate advisors is more important than ever. We look forward to helping clients to navigate the challenges ahead, whatever they may be.
Read all about the Q4 2017 central London office market and interviews with industry market leaders in The Occupier.
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