Business Shrug Off Jitters
Amidst almost fever-pitch levels of political and economic uncertainty as the 29 March Brexit date loomed, firms in London continued to display their resilience by committing to new office space. The total level of take-up for Q1 has been marginally higher (1%) than the long-term quarterly average, and 3% higher than that achieved in Q1 2018. Nevertheless, whilst the data shows that businesses are progressing their real estate plans, there are others who are still cautious in their approach.
Overall, businesses have shrugged off Brexit jitters as approximately 3 million sq ft of office space across central London was leased in the first quarter of 2019, according to the latest research from DeVono Cresa.
Leasing activity in Q1 was overwhelmingly concentrated in the City and West End, accounting for 77% of all space taken across central London. This is the highest quarterly share for these two core markets in six years (Q1 2013) and significantly higher than the long-term average of 67%. The dominance of these traditional markets has been strengthening over the past year with above average leasing volumes. Largely a consequence of new buildings completing in these markets particularly in the fringe areas, such as Old Street and Clerkenwell. This has been more evident in the City market which has not only seen its geography widen but its new buildings getting bigger (and taller). In the West End, this encompasses the growth in the submarkets of Paddington, King’s Cross and White City.
Demand for Grade A space, built or otherwise, has continued to drive leasing activity, accounting for 43% of space let. This figure is down on the previous quarter and is largely the result of a fall in volume and number of pre/early let deals. Whilst leasing of space in the early build stages have not fallen off a cliff, the pace has become a lot more subdued, compared with 2018. A tightening of supply in some areas such as the West End, business uncertainty and a rise in flexible office solutions could well be starting to trickle through into activity.
To find out more on London office market activity, turn to page 2, or for market rents turn to page 4.