Central London offices momentum to pick up later this year – Jones Lang LaSalle
Activity in the market for office space for sale and to let in Central London has been held back so far this year by the ‘wait-and-see’ attitude among occupiers, says Jones Lang LaSalle. But the firm expects deal momentum to pick up in the second half of 2012 and says that at some point this momentum will create a domino effect across the capital for the best office space, particularly for City offices.
Many occupiers are currently choosing to restructure existing leases, where their properties remain fit for purpose, as the ongoing financial uncertainty forces large occupiers in the City in particular to put off decisions. The TMT and media sectors are exceptions to this trend and are dominating activity in the markets for offices in the West End and office space in Midtown. The TMT sector alone currently accounts for nearly 20% of all requirements across London, says Damian Corbett, head of London Capital Markets at JLL.
Overseas investors are still strongly focused on London, Mr. Corbett added, with significant new requirements registered in recent weeks from major sovereign wealth funds that are new to the UK. Meanwhile, supply remains an issue, with little new stock coming to the market – so prime yields are expected to remain firm. Total investment volumes across the Central London office market to date this year total £1.3bn, with 65% of this coming from overseas investors, JLL says.
The firm says take-up volumes so far this year in the City total 625,000 sq ft, which is 22% lower than at the same time last year, while take-up of office space in the West End is down 15% year-on-year at 552,500 sq ft. “A further 1m sq ft remains under offer in the City and 400,000 sq ft in the West End,” JLL notes. The firm says prime rents for office space in the City are currently £55 per sq ft, and are at £95 per sq ft in the West End.
