CENTRAL LONDON OFFICES DEFY UNCERTAINTY AS TAKE-UP SURGES 20%
• 15.8 million sq ft leased in 2018, 19.9% up on 2017
• Paddington (up 214%) and King’s Cross & Euston (up 88%) the best-performing sub-markets
• Nearly 9 million sq ft of new office space under construction across the capital
Central London office take-up in 2018 surged 20% compared to the previous year as occupiers shrugged off the prevailing economic and political uncertainty, according to Gerald Eve’s latest London Markets research.
It was the highest annual take-up since the launch of the research report in 2014, and in a sign of additional strength a further 2.4 million sq ft of space is currently under offer.
The Paddington and Kings Cross & Euston submarkets performed particularly well over the course of the year, seeing rises of 214% and 88% respectively in leasing compared to the previous 12 months. Marylebone (58%), Midtown (54%) and Canary Wharf (40%) also had strong years, with the City remaining the biggest submarket by volume with 4.68 million sq ft of lettings, a 21% increase on 2017.
Media & technology and professional services firms were the strongest sectors, between them accounting for more than 40% of take-up in every quarter of the year. The serviced office sector was also a major player, accounting for 17% of total take-up, as the incumbents expanded and new entrants signed for space.
The capital’s development pipeline remained robust, with 8.94 million sq ft due to complete between now and 2020, a slight tick downwards on the 9.4 million sq ft in the pipeline at the end of 2017. Availability was broadly static, standing at 12.7 million sq ft at the end of the year, just over the two-year average.
Steve Johns, partner at Gerald Eve, said: “The second half of the year in central London was particularly strong, with take up over 1.2 million sq ft higher than in either H1 or the same period in 2017. This shows the fundamental strength of the market and the occupational demand that has underpinned take-up – driven by lease expiries, obsolescence and expansion – despite the continuing economic and political uncertainty. There has been a flight to quality and occupier momentum has increased during 2018. This has led to increased pre-letting activity and an increase in space let during construction. Occupiers are reasoning that the uncertainty seems set to continue for a while yet, and that they cannot afford to wait before committing to space. This pragmatism is welcome and is at least part of the reason behind what was a surprisingly strong 2018.”
Lloyd Davies, partner at Gerald Eve, added: “The continued draw of submarkets away from some of London’s traditional office locations has been one of the key stories of recent years. 2018 reinforced the growth in take-up and investor interest in such areas. Locations offering future infrastructure improvements with appropriate building styles and character are receiving increasing interest from both occupiers and investors. As these submarkets mature, particularly around improved transport hubs, they are likely to benefit further from these strategic changes and perform well over the coming years.”