Momentum in London Leasing Market Continues – Supported By East London - Cushman & Wakefield

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Momentum in London Leasing Market Continues – Supported By East London

Leasing activity in the first half of the year totalled just over 6.26 million sq ft— according to research published today by global real estate adviser Cushman & Wakefield (C&W). This is 13% ahead of the same point in 2014 when 5.6 million sq ft was transacted and is the highest Central London first half total since 1998, when 6.7 million sq ft was let.

Lettings in Q2 reached 3.3 million sq ft, increasing quarter on quarter and significantly above the 10 year quarterly average of 2.5 million sq ft.  There was a significant upturn in activity in East London, with 1.2 million sq ft let, only marginally behind the City market (1.24 million sq ft) and significantly ahead of West End volumes (915,000 sq ft).  East London take-up was at its highest level since Q4 2010 and this boost in activity was as a result of three transactions over 100,000 sq ft signing- FCA (425,000 sq ft at TIQ, Stratford), TFL (250,000 sq ft at TIQ Stratford) and Deutsche Bank (389,000 sq ft at 10 Upper Bank Street, Canary Wharf).  

Elaine Rossall, C&W’s head of London Markets research, said: “This quarter the focus of leasing activity has all been in East London, as occupiers seek good quality cost effective space and are buying into the positive benefit of Crossrail.  Canary Wharf, in particular, has moved from double digit vacancy rates just 12 months ago to one where the vacancy rate is now on a par with the City. ”

Preletting activity returned to the market in Q2, with over 1.0 million sq ft of prelets signed this quarter or 31% of total volumes.  As well as the two TIQ transactions, the other major prelet was a further 190,000 sq ft transaction to Google at Kings Cross, which brings their commitment to the area to 1.3 million sq ft.

Andy Tyler, C&W’s head of West End office agency said “With the Central London vacancy rate falling to 5.0% over the quarter,- the lowest level since 2008- preletting is anticipated to remain a key feature of the lettings market in the coming months as occupiers, particularly those with larger requirements are increasingly  frustrated in their search for space.”

The leasing market continues to be more balanced in terms of sectors, with banking & financial services occupiers most active this quarter.  As well as the transaction to Deutsche Bank, we have also seen a flurry of banking & financial services deals in the 20-50,000 sq ft range, including Commonwealth Bank of Australia, HSBC and PJT Partners.  

Prime rents continue to rise, with average rental growth of 8% evidenced across Central London in the year to June, with rents in the City and the East London outperforming.   Prime rents in the City now stand at £64.50 per sq ft and in the West End at £125 per sq ft.  With supply expected to contract further during the remainder of the year, C&W expect rental growth to pick up in the latter part of the 2015. 

Andrew Parker, C&W’s head of City of London office agency, said: “We are increasingly observing rents achieved in the £70s for upper floors and terraces in non-tower space. This willingness of occupiers to pay above prime rents, reflects increasing occupier confidence in the market place.”

City & EAST LONDON – q2 2015 top 5 transactions by size

TENANT

SQ ft

address

FCA

425,000

International Quarter Building 5

Deutsche Bank

389,000

10 Upper Bank Street

TfL

250,000

International Quarter Building 6

Brit

66,304

The Leadenhall Building, 122 Leadenhall Street

We Work

60,481

Aldgate Tower, 10 Whitechapel High Street

CITY  & EAST LONDON – q2 2015 top 5 transactions by RENT

TENANT

SQ ft

address

Rent Per SQ Ft

Banco Sabadell

18,091

The Leadenhall Building, 122 Leadenhall Street

£82.50

DRW

9,234

The Leadenhall Building, 122 Leadenhall Street

£78.00

Ashsted

10,546

100 Cheapside

£75.00

Tradewin

5,000

125 Wood Street

£72.50

Cognolink

18,374

The Steward Building, 27-33 Artillery Lane

£70.00

west end – q2 2015 top 5 transactions by size

TENANT

SQ ft

address

Google

190,000

Kings Cross Central Building S2

ACCA

37,303

The Adelphi, 1-11 John Adam Street

Development Securities

32,783

7 Howick Place

PJT Partners

28,804

1 Curzon Street

TPG

27,117

116 Park Street

west end – q2 2015 top 5 transactions by RENT

TENANT

SQ ft

address

Rent Per SQ Ft

PJT Partners

28,804

1 Curzon Street

£108.00

Diageo

9,347

12 Golden Square

£97.80

Thunderbird Partners

8,686

110 Park Street

£97.50

Waverton Investment Management

20,566

16 Babmaes Street

£90.00

Allfunds Bank

17,202

2 Fitzroy Place, Mortimer Street

£90.00