Central London leasing activity in the first quarter of the year totaled just over 2.6 million sq ft, according to research published today by global real estate adviser Cushman & Wakefield. This is 10% ahead of the same point in 2015 when 2.5m sq ft was transacted and is the highest Central London first quarter total since 2010, when 3.8m sq ft was let.
Pre-letting activity boosted the market during Q1, accounting for 25% of transactions. Just under 650,000 sq ft of pre-lets were signed this quarter, which was more than 100,000 sq ft ahead of the same point in 2015 and 20% ahead of the 10-year average. The largest pre-let was at King’s Cross where New Look signed for 127,000 sq ft but, interestingly, overall the banking & financial services sector accounted for 40% by volume, including Rathbones, Jefferies Group in the City and Oaktree Capital Management in the West End.
Both the West End and East London markets saw leasing volumes ahead of Q1 2015, with East London volumes tripling and West End volumes increasing by 40%. The City saw a decline in volumes of 13% but this was on the back of a strong leasing market in Q1 2015 and volumes still remained above both the five and 10-year averages.
Leasing activity was supported by an abundance of large transactions, with 10 in excess of 50,000 sq ft of which five were over 100,000 sq ft. This compares with eight 50,000 sq ft plus transactions recorded in both Q1 2015 (two over 100,000 sq ft) and Q4 2015 (three over 100,000 sq ft). The largest transaction signed this quarter was 315,000 sq ft let to Thomson Reuters at 5 Canada Square, Canary Wharf, while other major transactions included lettings to Investec, New Look, Jefferies Group and WeWork.
Elaine Rossall, Head of London Markets research, Cushman & Wakefield, said: “It has been a very positive start to the year and while we anticipate that there will be pause in activity in the run up to the EU referendum, the underlying trends remain strong. Employment levels in particular remain high which should support strong levels of take-up.”
Andy Tyler, Head of West End, Cushman & Wakefield, said: “Leasing in the West End was up significantly year-on-year in the first quarter. We are also starting to see an uplift in supply in the West End as much-needed new developments come onstream, which is in contrast to the rest of Central London where availability remains down on a year ago. On the other hand, under offers are below average which points to a slowing down in leasing activity in the second quarter, which is to be expected in anticipation of the referendum”
Prime rents continue to rise, with average rental growth of 10% evidenced across Central London in the year to March, with rents in emerging submarkets driving this growth and significantly outperforming the core areas. Prime rents in the City now stand at £70 per sq ft and in the West End at £125 per sq ft.
Andrew Parker, Head of City of London office agency, Cushman & Wakefield, said: “There were a number of sizeable leasing deals in the City market during Q1. Under-offers have fallen by 11% quarter on quarter, in part due to take-up but probably indicative too of increased caution as we get closer to the June referendum although clearly companies that have lease events during this time are still going to need space. The City market in particular is likely to benefit from a bounce in the second half of the year in the event of a vote to remain in the EU.”