TMT driving West End office leasing, while City caution continues – Cushman & Wakefield
Cushman & Wakefield says the TMT sector is driving office leasing activity in London’s West End, accounting for more than a third of take-up in the third quarter of this year. Echoing recent research from CBRE, the firm says take-up in Central London overall was the highest quarterly total of the year to date, and calculates the total for Q3 at 2.2m sq ft, compared with 1.43m sq ft in Q2 and 2.63m a year ago in Q3 2010.
West End take-up for the quarter reached 806,085 sq ft, taking the year-to-date total to 2.3m sq ft. Cushman & Wakefield says leasing in this part of London is down 15% year-on-year as the global economic uncertainty has had an effect on all industries – but the TMT sector is driving the market, accounting not only for a large slice of Q3 take-up but also representing just under half of all active demand. “A number of companies are considering longer-term moves, with lease events remaining the main trigger for potential acquisitions,” the firm says.
C&W expects annual take-up in the West End to be in line with the five-year average. It says demand in the West End is 4.3m sq ft, up from 3.1m sq ft at the start of 2011, while supply has shrunk by 25% since the beginning of the year, to 4.7m sq ft from 6.2m sq ft. It notes that there is slightly less than 1.8m sq ft of office space currently under construction in the West End, with 425,000 sq ft due for completion in Q4 2011 and more than 1m sq ft in 2012.
In the City and Docklands, take-up jumped to 1.4m sq ft in Q3 from 806,085 sq ft in Q2 thanks to two large deals, including the EMA’s 265,887 sq ft pre-let in Canary Wharf and the Trowers & Hamlins lease of 101,000 sq ft at 3 Bunhill Row. However, Cushman & Wakefield cautions that “one strong quarter is not sufficient to call a recovery in the market” and says the underlying trend remains one of more constrained activity. Take-up so far this year has been subdued at 2.8m sq ft, which is down about 45% year-on-year, it notes, and annual take-up is forecast at below 4m sq ft – the lowest since 2003. C&W notes that two large pre-lets under offer – by AON and CMS Cameron McKenna – could boost the total for 2011.
Active requirements in the City & Docklands market stand at 4.9m sq ft, and many of the larger enquiries are longer-term requirements that may go to pre-lets, given the limited choice on offer. Supply in these parts of Central London stood at 12m sq ft at the end of Q3 while there is just over 4m sq ft currently under construction. The development pipeline is well below the five-year average. More than 1m sq ft of space is due to complete in 2012 – almost half of this will be in the Shard, C&W notes. The firm expects some occupiers to delay decisions further as a result of the current economic uncertainty, and forecasts 2012 take-up will be significantly below average, although prospects further out are more positive, it adds.
