Take-up of office space in Central London for the first three months of 2014 stood at 2.4 million sq ft. This is broadly similar to last year but the real story is in the volume of space under offer: completed transactions plus space under offer is approximately 30% higher than at the end of Q1 2013.
C&W estimates that there is around 3.2 million sq ft under offer, which is the highest volume since Q2 2007 and virtually double the five-year quarterly average. Positively, space under offer has increased across all Central London markets and suggests strong levels of leasing activity throughout the rest of the year in all areas. There are four potential deals over 100,000 sq ft currently under offer: TfL has placed c.230,000 sq ft under offer at 10 Upper Bank Street, E14; Mizuho is under offer at 2 New Ludgate, EC4 (193,000 sq ft); Havas is under offer at 3 Pancras Square, N1 (160,000 sq ft) and Estée Lauder is under offer at 1 Fitzroy Place,W1 (140,000 sq ft).
There are also a number of large active requirements in the market from traditional business sectors that are close to going under offer, including FCA, Société Générale, Rabobank, DLA Piper and others, which will also support future leasing volumes.
Against a background of declining supply, pre-letting continues to be a major part of the leasing market. This quarter 740,000 sq ft has been let in advance of completion in ten transactions, which equates to just under a third of all leasing volumes this quarter. This is a similar proportion to that recorded in 2013. The largest transaction signed this quarter was at 25 Churchill Place, E14, where EY pre-leased 207,000 sq ft. Pre-letting shows no sign of abating and will continue to play an important role in the leasing market during 2014. C&W predicts that there is a further 1 million sq ft of pre-lets under offer in 20 transactions across Central London. Approximately, 600,000 sq ft of these pre-lets are for developments in the West End, with King’s Cross the main focus.
Andy Tyler, C&W’s head of West End office agency, said: “The low supply environment that occupiers now face will force them to take earlier decisions. Pre-letting will become the obvious route to secure suitable space for those needing to move in the next 12 to 24 months.”
Canary Wharf & Docklands recorded a remarkable turnaround in occupier activity in Q1 2014. Leasing volumes stood at almost 420,000 sq ft, which already equals 85% of the total volumes let in the area in the whole of 2013 and is the highest quarterly volume recorded since Q4 2010. As well as the transaction to EY, MDU has signed for just under 60,000 sq ft at 1 Canada Square, E14. This resurgence of the Canary Wharf & Docklands leasing market is set to continue throughout 2014, with almost 530,000 sq ft currently under offer. This includes approximately 185,000 sq ft under offer at 25 Canada Square, E14. Current space under offer 75% higher than the volume under offer at the end of Q4 2013 and is nearly three times above the five-year average. The submarket is benefitting from the general improvements in business sentiment, declining opportunities for larger scale occupiers and the relative value for money of the office space.
There are increasing signs of a more balanced recovery taking place across Central London. Media & Tech remained dominant in the West End, accounting for just over half of all leasing volumes in Q1. Major transactions include c.161,000 sq ft let to Google at 6 Pancras Square, N1, c.30, 000 sq ft let to UKTV at Hammersmith Grove, W6, and Twitter leasing c.25, 000 sq ft at Air W1. The City & Docklands market has seen activity from a wide range of sectors – Banking & Financial services companies leased 23% of space, followed by Professional Services (19%). Media & Tech accounted for 13% of transactions.
Andrew Parker, C&W’s head of City office agency, said: “Improvements in business sentiment is now more widespread across all business sectors in the City and is boosting occupier activity. We are now seeing healthy competition for office space across the City market, and choice is diminishing for larger occupiers. This is likely to lead to a sharp uptick in rental values as the year progresses.”