Looking to the next wave of demand
London’s key office markets – the West End, City and Docklands – have returned to significant growth in the first three months of 2010, says Cushman & Wakefield. New data show that companies have been moving quickly to take advantage of relatively low rents and the gradually dwindling supply of best-quality space, C&W says.
A total of 3.1m sq ft of office space was taken up across central London, the highest figure since Q4 2008 and 330% higher than the same period in 2009, the report says.
Cushman & Wakefield believes that the best start to a year since 1998 could now encourage developers to push ahead with the development of new landmark office buildings, although many will require pre-lets in order to secure funding.
The City & Docklands market saw more than 2.1m sq ft leased during the first quarter of 2010 – five times as much as Q1 2009 and 16% higher than the final quarter of 2009. The strong demand for office space in the city has seen prime rents rise 13.6% in the quarter to £50 per sq ft – a level last seen in Q4 2008, C&W says.
The West End office market is also healthy, with 973,100 sq ft leased in the first quarter, up 216% year-on-year. “The West End has now had two consecutive quarters of take-up at or above the long-term quarterly average as it emerges from recession,” the group notes.
Rents for prime office space in the most expensive submarkets, Mayfair and St James’s, have risen 6% during the quarter to £80 per sq ft. They were last at this level 12 months ago.
James Young, head of Cushman & Wakefield’s City office, said: “The first quarter of the year has seen a number of larger occupiers taking a long term decision on their future HQs, and a lack of development activity now means that rents are rising as availability drops. However, attention now turns to where the next wave of demand is coming from, which we need to see picking up to sustain the recovery.”
George Roberts, head of London occupiers, Cushman & Wakefield, said: “Whilst one shouldn’t read too much into one quarter’s figures, there is no doubt that the underlying market feels much more positive than at the end of the year with increased levels of activity”.
