Central London take-up totalled 3.0 million sq ft for Q2 2019, 12% above Q1 2019 and 19% above the 10-year average. While Q2 2019 investment volumes totalled just £1.7 billion, the lowest quarter figure since Q1 2010, 119% below the 10-year average, according to Avison Young’s Central London office analysis Q2 2019.
Jeremy Prosser, Principal in the City Agency team at Avison Young comments: “The occupational market saw strong performance across all London markets in this quarter, with tenant demand dominated by Financial Services, making up 30% of take up. Service office take up accounted for 15% of overall take-up, albeit there was a lack of larger serviced office deals, with a fall in the average deal size to 23,000 sq ft, down 39% on the average size over the last two years, potentially an indication of an absence of larger leasing opportunities on the market.
“Three deals were recorded in Q2 over 100,000 sq ft all of which were prelets, this is simultaneously limiting supply in the development pipeline. The short-term development pipeline is noticeable constrained with very little space due for completion by the end of this year, a result of the strong preletting activity in 2017 and 2018. Although landlords are nervous about commencing new schemes, longer term construction activity has picked up with several new schemes now fully underway.”
In the investment market, Q2 saw the lowest quarterly volume across Central London since 2010. The £1.7 billion transacted was significantly down on the corresponding period last year where transaction volumes reached around £5.8 billion. Chris Gore Principal in the City Investment team at Avison Young, says: “Whilst economic and political uncertainties are key issues investors are contending with, the continued lack of supply has been the main driver for a more subdued investment market.
“On a more positive notes, whilst H1 was subdued in the investment market, we have already seen over £850 million of transactions in the first three weeks of July. Investor sentiment remains positive with competitive bidding on many properties that have come to the market, particularly value add investments, given the favourable occupational market dynamics.”
