The amount of office space under offer across Central London rose by 47% in the first quarter of the year, according to new research by global property advisor CBRE. This dramatic rise is expected
to translate into an increase in take-up in 2013, as business confidence returns following last year’s widespread uncertainly.
The Midtown market which includes properties from Kingsway to Farringdon Street, and King’s Cross to the north performed particularly well, and prime rents have now reached £55 per sq ft, rivalling the top prices paid in the City (also at £55 per sq ft). Internet giant Google’s commitment to take 725,000 sq ft has undoubtedly accounted for a huge rise in take-up, but Midtown has demonstrated its ability to attract a range of occupiers, and CBRE expects the area to show the strongest growth of any
Central London market over the coming few years. Midtown has consistently had the lowest vacancy rates of any Central London market since 2010.
Charlie Killen, Executive Director, Midtown and Southbank, CBRE said: “The promise of Farringdon’s Crossrail station is undoubtedly boosting Midtown’s appeal as a vibrant business location, appealing to a wide range of corporate, professional and to a greater extent TMT occupiers. However, notwithstanding the improved connectivity, we’re noticing a number of West End occupiers also looking afresh at Midtown as an office destination, attracted by the relatively lower rents, availability of suitable Grade A stock and abundant leisure amenities.”
As predicted by CBRE, overall investment volumes fell quarter on quarter in Q1 2013. This was due to a lack of liquidity in the market, rather than lower investor appetite, as interest from foreign buyers shows no sign of abating. Exceptionally high overseas demand in 2012 has eroded the supply of investment stock, with only £2.6bn currently available across Central London. Unless this stock is replenished, investment volumes will continue to be affected in 2013.
In continuation of recent trends, overseas investors accounted for 61% of all transactions completed in Q1 2013. Of these, Far East Asian investors were the most prominent, accounting for 23%, while Middle Eastern investors acquired 15% of the total. UK institutions were the most active domestic investor type, representing 19% of the total volume. UK companies acquired 13% of the quarter’s deals by volume.
Mike Edwards, Executive Director, Central London Capital Markets, CBRE, said:
“Overseas investor appetite for large lots remained high relative to falling supply, with international capital accounting for all seven of the deals over £100 million in the first three months of the year, compared with 11 in the previous quarter.
“Foreign buyers are continuing to seek to deploy significant funds in the Central London property market and City prime yields have dropped to 4.75% in response to the tightening supply. We
expect to continue to see investors looking further up the risk curve this quarter, as availability of prime stock remains low.”
