Our quarterly review of the central London office occupier and investment markets
Central London take-up totalled 3.3 million sq ft in Q3 2019, which was 29% up on the 10-year average despite uncertainty during the run-up to Brexit. There has been continued strong transactional activity in the 50,000 sq ft + size bands showing high profile occupiers continue to commit to London.
Significant Q3 examples include BT Group (330,000 sq ft at 1 Braham Street, E1), Diageo (130,000 sq ft at Turner House, W1) and Bridgepoint (83,000 sq ft at Marble Arch Place, W1), all three of which were acquired for the business’ global headquarters.
Serviced office take-up was relatively quiet at the start of the year but accounted for a record 30% of take-up, over 1.0 million sq ft for Q3 alone. WeWork was the largest acquirer of space with 11 acquisitions in total, including the operator’s acquisition of EMA’s 285,000 sq ft at 25 Churchill Place, E14. The recent halt on WeWork letting activity may see serviced office take-up slow for year-end.
With pre-lets accounting for 34% of take-up in Q3 2019, Grade A supply continues to be under pressure. The under construction pipeline currently totals 16.4 million sq ft, due for delivery by year-end 2022, of which 52% is pre-let, rising to 71% in the West End. It is likely that the coming months will see a further increase in the number of pre-construction pre-lets with tenants having to open their search earlier to ensure availability of space.
Whilst investment picked up in Q3 2019 to £2.6 billion, investment volumes are still significantly behind where they were this time last year. Investor confidence remains somewhat fragile given market uncertainty, and volumes are further restricted by lower levels of available stock. The market remains robust for prime stock, and interest has picked up for opportunistic stock driven by strong occupational fundamentals.