Central London Occupier market

TAKE-UP

Take-up across Central London fell to 1.0 million sq ft in Q3 2020 which was 7% below the previous quarter and 59% below the 10-year average.

The largest deal of the quarter was the law firm Baker & McKenzie taking 153,000 sq ft at 280 Bishopsgate, EC2. This was followed by Netflix trebling its office space in London by taking 87,000 sq ft at the Copyright office building, 30 Berners Street, W1.

July was the strongest month recording 45% of the quarter’s take-up. This was followed by a weak August that only accounted for 18% before activity picked up greatly in September.

Only ten deals over 20,000 sq ft completed during the quarter, compared to the ten-year average of 28. These deals accounted for 52.5% of the quarter’s take-up.

Professional services accounted for the most take-up by tenant sector with 30% - accounted for primarily by the Baker & McKenzie acquisition. This was followed by the TMT & Creative and Government & Services sectors that each accounted for 16% of activity.

AVAILABILITY

Availability rose for the third consecutive quarter to 14.3 million sq ft, a 13% rise on Q2. The central London vacancy rate has subsequently risen for the third quarter in a row to reach 4.8% from 4.3% in Q2. The largest increases in availability were recorded in the Southbank and Tech Belt markets which rose by 56% and 44% respectively. Despite these increases, availability remains 6.6% below the 10-year average.

Seventeen developments completed during the quarter totalling 1.7 million sq ft, similar to the amount of space delivered to the market during the second quarter of the year. The largest building to complete was the fully let 320,000 sq ft One Braham, followed by EightyFen that has 55% of its total 240,000 sq ft still available.

The under construction pipeline remained stable during the quarter, and currently totals 14.2 million sq ft, 38% of which is already pre-let. This leaves 8.8 million sq ft of available space, of which 4.7 million sq ft is planned to complete by the end of 2021.

RENTAL GROWTH

We are continuing to see a relative resilience in the rental market, with headline rents holding up in the vast majority of our submarkets. We have nevertheless seen an increase in incentives in a number of submarkets. Prime headline rents at the moment are £72.50 per sq ft in the City, £115 per sq ft in the West End and £45.00 per sq ft in East London.

Although rental values have remained stable to date, the following months could see this change as the reality of Covid-19’s impact on the economy sets in and occupiers potentially reconsider their space needs following the initial return to the workplace.

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