There is now an imminent prospect of a step up in intensity in leasing activity. The growing divide between leasing volume and the amount of floorspace required by known applicants in Central London will result in an upswing in take-up in the near future. This is because, after remaining fairly stable at around 2.5m sq ft since late 2011, requirements are beginning to convert into under offers, which have increased sharply in the past quarter.
This is underpinned by expected output growth in Greater London, now revised upward to 3.5% for 2013, far stronger than the equivalent figure for the UK, at 1.6%. Oxford Economics expects this trend to continue in 2014, with growth of 3.3%. Over the decade output growth is expected to average 3.5% per annum, resulting in employment growth of 310,000 office-based jobs in Central London.
Take-up has declined for a second quarter running from the peak reached in Q3 2013. In Q1 2014 it totalled 2.8m sq ft compared to 3.4m sq ft in Q3. However, the four quarter moving total is 12.5m sq ft, in line with the 10 year average for Central London take up, and the highest such total since Q2 2011.
Rents remained stable in most markets except the West End. Here, despite continuing low take-up (the average rolling 12 month total has remained at around 2.2m sq ft, 30% below the 10 year average, for six years now) prime rent continues to rise strongly, this quarter by £5 to £107.50 per sq ft.
Investment activity in Central London has fallen considerably in Q1 compared to the previous quarter. Transactions totalled £2.6bn, compared to £9.5bn in Q4 2013. To some extent this is a normal reversal following a frenetic last quarter of the previous year. But, as in early 2013, lack of on-market stock has curbed transaction activity, despite strong demand
Source : DTZ (Groupe UGL)