Central London office space take-up falls after strong 2010 – CBRE
CBRE says take-up across Central London weakened sharply during Q1 2011 to 2.3m sq ft, the lowest level since the first half of 2009, after an exceptionally strong 2010. More than three-quarters of the Q1 take-up was secondhand space, it notes. Leasing activity held up well in the West End but was down considerably in the City and other Central London markets compared with the previous quarter.
The availability of office space in Central London has fallen by 35% from the Q2 2009 peak, says CB Richard Ellis in its latest overview of the market. It says availability fell during the first quarter of 2011, for the seventh quarter in a row, to reach 13.8m sq ft. Only the availability of newly completed office space is above trend, it notes, and this is expected to fall as the pipeline of developments is fairly limited. The Central London vacancy rate fell to 5.1% from 5.5% in the previous quarter. As has been widely reported, the squeeze on financing for new schemes means that development completions this year are expected to be sharply lower – CBRE notes that only 1.8m sq ft is scheduled to be completed this year, compared with 3.9m sq ft in 2010.
Rental growth for office space in Central London slowed during the first quarter to 7.9% on an annual basis. In the City annual growth slipped to 11.3% from 19.9%. The West End was the only submarket to show any growth on a quarterly basis, rising 2.2% q/q in the first quarter.
Investment in office space in Central London declined after a strong finish to 2010, with transaction volumes for the first quarter of 2011 at £2.2bn. West End prime yields remained at 4.0% while in the City they moved in to 5.25%, CBRE notes.
