BNP Paribas Real Estate data has revealed that law firms are snapping up space in the Square Mile in a bid to secure talent and tempt staff back to the office.
According to the latest H1 2023 data, take-up totalled 4.14m sq ft, of which Professional Services was the most active tenant sector exceeding 988,500 sq ft. Of this, 508,000 sq ft of take-up can be attributed to law firms.
Notable law firm deals include Goodwin Procter signing for 89,645 sq ft at Christchurch Court (EC1) at £82.50 per sq ft, marking the largest City deal to complete in Q2; Latham & Watkins pre-letting a further 77,000 sq ft at One Leadenhall (EC1) at £82.50 per sq ft bringing their total space commitment to 280,000 sq ft; Dentons’ pre-let at One Liverpool Street taking 67,482 sq ft at £87.50; and Arbor’s new lease with Winckworth Sherwood, relocating its HQ to Bankside in a 28,000 sq ft letting.
James Strevens, head of City leasing at BNP Paribas Real Estate commented: “The legal sector is emerging as the dominate player in the City market, spurred on by deals from firms such as Clifford Chance and Reed Smith to name but a few. Establishing brand identity is the order of the day as they seek out sustainable, size appropriate spaces in the form of best in class amenity-rich office buildings. They recognise the importance of the office more than ever now, and seek to provide more interesting and collaborative spaces for staff and clients alike.”
Mhairi Thomson, associate director, office research at BNP Paribas Real Estate added: “Lease events are coming up for a wide range of law firms with a number of expiries scheduled for the rest of 2023, equating to 225,000 sq ft of the wider Professional Services tenant sector. On this basis, we anticipate a flurry of interest to pour in from law firms. With constrained Grade A supply, this is likely to push average prime rents in the City up.”
Supply in Q2 2023 decreased to 11.1m sq ft. While this indicates a -14.1% year-on-year drop, supply remains slightly higher than the ten-year average of 10.4m sq ft. City vacancy reached 10.38% as of Q2 2023, representing the fourth consecutive quarterly fall and dropping below the ten-year average.
Prime rents across the City remain at £72.50 per sq ft, increasing to £85 for City Towers. The ongoing demand for best-in-class space has driven a wider spread between prime and premium rents in the City, with the latter reaching £95 per sq ft.
Banking and Finance dropped to become the second largest tenant sector in terms of take-up in 2023, although the sector has experienced a 64.1% uptick compared to H1 2022, reporting over 482,500 sq ft this year-to-date.
BNP Paribas Real Estate forecast a City office rental growth of 4.5% to £75.75 in 2025.
