Central London office leasing volumes surpass 2012 total

More than 7.4 million sq ft of office space in Central London has been leased in the first nine months of this year – a figure which is already around 165,000 sq ft ahead of 2012’s total, according to research published today by Cushman & Wakefield.

Heightened leasing activity witnessed in the early summer has continued into Q3 2013 and led to occupiers taking decisive action in order to avoid a future lack of supply and a spike in rental values.

Central London take-up totalled 2.8 million sq ft in Q3 2013, 18% up on the previous quarter. The total volume of Central London office leasing seen in Q1-Q3 2013 is also 44% higher than the 5.1 million sq ft transacted during the same period in 2012.

In the City, a total of 1.7 million sq ft of transactions have been recorded in this quarter. This is on a par with Q2 2013, which was the highest quarterly figure since Q3 2007. The resurgence in the City market has been driven by the return of larger transactions and an increasing number of pre-lets – two pre-let transactions in excess of 100,000 sq ft have signed in Q3. These were both to media occupiers: News International pre-leasing 430,000 sq ft at the Place and Ogilvy & Mather pre-leasing 234,000 sq ft at Sea Containers House.

Activity in the Docklands remains slow, mainly due to a quiet banking sector, but it has increased from around 75,000 sq ft of transactions in Q2 to 310,000 sq ft in this quarter. However, this figure takes into account KPMG’s 200,000 sq ft letting of 30 North Colonade, where it is relocating staff from the City.

Andrew Parker, head of City agency at Cushman & Wakefield, said: “Sentiment in the City occupational market is definitely on the increase and this is reflected in the continuing momentum seen in the leasing market. We have seen take-up in the first nine months of 2013 around 50% above the same point in 2012. Activity in the last two quarters has been above trend, supported by larger occupiers moving now in anticipation of a shortage of quality stock in the near future.”

More than 856,000 sq ft of transactions completed in the West End this quarter, which is above the five-year average. With the exception of Q1 2013, which was bolstered by Google’s transaction, this is the highest quarterly volume since Q4 2011. When Q1-Q3 2013 is compared to the first nine months of last year, activity is up by around 46% – but this can largely be attributed to the Google deal in January.

Andy Tyler, head of West End office agency at Cushman & Wakefield, said: “The upturn in leasing activity in London’s West End seen this quarter reflects an air of positivity which hasn’t been present for some time. We are seeing the return of higher rents, competitive bidding and an increased number of requirements – I am convinced that we will look back at this moment in time as being the turning point for the cycle.”

The media sector continues to dominate leasing activity across Central London, accounting for 38% of leasing activity in Q3, with financial services and legal the next most active at 13% and 12% of transaction volumes.

Singaporean sovereign wealth fund Temasek is rumoured to be paying the highest Central London office rent – £135 per sq ft – after leasing space in St James’s last month. This is close to the peak of the last cycle in 2007.

Cushman & Wakefield anticipates activity to continue to be robust in the final quarter of the year, with the volume of space under offer standing at 1.8 million sq ft.

In the City, approximately 1.1 million sq ft is under offer, with the largest deals around 50,000 sq ft. The volume of space under offer is down quarter-on-quarter due to the higher volume of signed transactions but remains on a par with the five year average.

Space under offer in the West End paints an improving picture with 713,000 sq ft under offer, up from 521,000 sq ft at the end of Q2 2013.