TMT still driving Central London offices take-up – Jones Lang LaSalle
Investment in the Central London offices market had reached £7.3bn by the end of H1 2012, up 24% year-on-year and driven by overseas investment of £5.1bn, Jones Lang LaSalle notes. In its latest research on the Central London market, the firm says leasing volumes rose 3% in the second quarter compared with the first, with 1.8m sq ft transacted and the City of London offices market recording the strongest Q2 since 2007 with 1.2m sq ft let.
“The TMT subsector continued to drive both take-up and demand and we anticipate this to continue into 2013,” it adds. Just under 1m sq ft has been let to the TMT sector during the first half of the year, JLL says, accounting for 26% of the total, and compared with 700,000 sq ft a year earlier. The TMT sector now accounts for around a third of total active demand in London, Jones Lang LaSalle notes, compared with 17% at the same point last year.
There had been 10 deals of more than 50,000 sq ft by the end of Q2, with eight of these being pre-lets. This compares with just four transactions of this size during the first half of 2011, JLL notes. “Looking ahead, we anticipate further pre-letting activity, with the likes of Kiln at 20 Fenchurch St, EC3 under offer to take 80,000 sq ft and Google at Argents Kings’ Cross, N1 scheme looking to secure a pre-let on 700,000 sq ft in the final quarter of the year,” it adds. While the Olympics and economic uncertainty may have put the brakes on activity this summer, the firm expects larger-scale requirements to start to transact during the final months of the year.
Occupier demand fell 5% to end the quarter at 11.9m sq ft. JLL says 70% of requirements over 50,000 sq ft are being driven by lease events or consolidation, with only 11% as a result of expansion.
Speculative development remained stable at 7.1 million sq ft during Q2, after a 28% increase in the first quarter. Overall supply was up 3% at 11.9m sq ft by the end of Q2, with Grade A supply up 9% and Grade B supply down 6% to 3.1m sq ft. The rise in speculative development continues to be driven by the expected gap in supply “and London’s ability to attract equity in the absence of bank finance”, JLL says. However, there is still a shortage of schemes coming online from 2014 – nearly half of the pipeline is due to complete next year, 20% in 2014, and no speculative development currently under construction from 2015.
