Following a pause immediately after the Referendum vote to quit the EU, demand for central London office space has continued to shows signs of recovery.
Cushman & Wakefield Q3 figures reveal total occupational office space under offer in September – at 2.4m sq ft – was almost identical to the figure for the referendum month of June and 41% up from July’s low of 1.7m sq ft. September saw a resurgence in new occupiers committing to space which boosted the total.
Take-up volumes for the third quarter stood at 2.4 m sq ft which was up from 1.6 m sq ft in Q2 2016 and contributed to a total of 6.7m sq ft for the first three quarters of 2016.
The projected take up total for 2016 is 8.5m sq ft up on 2011 and 2012, however down on 2013, 2014 and 2015.
Figure 1: Central London lettings volumes 2005 – 2016
Andy Tyler, Head of West End Office at Cushman & Wakefield, said: “The leasing market slowed down sharply immediately post-Brexit but, as the latest data reveals, confidence is returning – albeit at a rather muted level.
“We are seeing new enquiries coming in and occupiers are not afraid to commit. Two very large deals concluded by Cushman & Wakefield during the quarter – in the emerging West End rather than central London – provide the evidence for this.
“Year-end figures are likely to exceed 2011 and 2012 when London was still suffering the effects of the Global Financial Crisis but confidence was returning. It is also worth noting the recent Business Rates increases could temper the competitive advantage which some locations have hitherto enjoyed and might play more to the West End and western fringe in future.
“Crucially, of course, what London seeks is clarity around what Brexit will look like and its impact. Only then will it be possible to fully assess the implications for the London office market. In this respect, 2017 could be a pivotal year.”
Alistair Brown, Head of City Office at Cushman & Wakefield, said: “The level of under offer space at the end of September has shown London’s occupiers are ready to move forward. They realise Brexit will not be a quick process and life in London goes on.
“Specifically, the City saw a 16% increase in office space going under offer during September, building on the momentum created over the summer by occupiers such as Wells Fargo who committed to 230,000 sq ft at 33 Central.”
Largest Central London deals completed in Q3 2016