This reduction marked a return to the below trend levels seen at the start of 2011 when take-up dipped below the 10-year average of 3.0m sq ft and stood at 2.3m sq ft and 2.2m sq ft in the first and second quarter respectively. However, take-up volumes are projected to pick up in the second half of the year as recovery in the wider economy, and improving sentiment, filters through to the occupational market.
The strongest performing market was the West End which recorded take-up in excess of its 10-year average at 1.1m sq ft; supported by a number of large deals in Victoria, including Burberry’s 125,200 sq ft acquisition at 1 Page Street.
Emma Crawford, Executive Director, Central London Leasing, CBRE, said: “Overall the Central London market experienced subdued leasing activity in the first quarter, with the West End standing out as the most robust. Strong take-up over the past 12 months has contributed to rental growth in some West End sub markets and highlights the West End’s resilience to the weak economic environment.”
Central London availability increased across all markets over the quarter to reach a total 16.3m sq ft, up from 15.7m sq ft at the end of 2011. Despite this increase, the rate at which availability has increased has begun to subside, while current supply remains significantly below the 10-year average of 17.7m sq ft.
Prime rental growth remained stable across the majority of Central London markets, with prime City and West End core rents fixed at £55.00 per sq ft and £92.50 per sq ft respectively. However, prime rents in some West End submarkets, such as Soho, Victoria and both North of Oxford Street East and West, rose over the quarter driven by robust demand.
Central London investment volumes rebounded strongly over the quarter, rising to £3.7bn from £1.7bn at the end of 2011. This placed investment turnover above the 10-year average of £2.6bn for the first time since Q2 2011. The figure was boosted by the completion of a large backlog of deals in the City that went under offer towards the end of 2011.
Overseas investors once again entered the market in a series of high profile acquisitions, accounting for 70% of the Central London total. Buyers from the Middle East (17%) and Far East Asia (23%) featured prominently, accounting for 40% of the total.
Simon Barrowcliff, Executive Director, Central London Capital Markets, CBRE, said: “London continues to remain an attractive proposition for overseas investors and attracts the largest proportion of cross-border flows into Europe. Overseas buyers have maintained their dominance of the Central London market in the first quarter – bolstered by some large purchases by Middle East and Far Eastern investors.”