Market Insights

DeVono Cresa launches its latest report ‘The Occupier’.  Shaun Dawson, Head of Insights for DeVono Cresa highlights “the demand for office space across central London has remained resilient flying in the face of unsettling political and economic headwinds both at home and abroad”. Leasing activity for H1 2018 shows that a resurgence in tenant demand in Q2 took the half year letting volume to 6.3 million sq ft – comfortably above the 5.1 million sq ft H1 long-term average.

International leasing commitment to central London continues, this has been highlighted not least by the Chinese Embassy deal for 589,000 sq ft at the Royal Mint Court scheme. Other notable deals include Japan’s Sumitomi Mitsui Banking Corporation’s letting at 100 Liverpool Street and our very own client The Trade Desk pre-letting 55,000 sq ft at Helical’s 1 Bartholomew Close scheme. These deals also highlight a tenants growing propensity towards Grade A space, of which 46% of the H1 2018 total leasing activity accounted for. 

Not surprising with the level of leasing activity in H1 2018, the volume of available space across central London has continued to reduce, now dipping below 16 million sq ft (15.8 million sq ft). Chris Lewis, Head of Office Agency & Consulting explains “Despite this fall, there is still plenty of space out there for tenants. Even with pronounced drops in availability in markets such as the West End, the market is pretty well stocked”.  Lewis continues “tenants remain cautious and a well-stocked market is leading to better deals being offered. Relatively stable rents and increasing rent-free periods are benefitting tenants willing to commit”. 

Dawson states “Rents remain favourable for tenants”  Prime rents across all central London submarkets have seen muted growth of just 3% over the past 12 months. While the majority of submarkets have seen no change, we have seen some upward shift in fringe locations such as Hackney/London Fields (+4%) to £40.00 per sq ft.  We have also recorded some increases in the more core locations of Canary Wharf (now at £47.50 per sq ft) and Paddington (now at a historic high of £70.00 per sq ft).  On the flip-side some core locations have taken a dip over the quarter: Covent Garden, Knightsbridge and Victoria have dipped by an average of 3%.

As competition for tenant demand hots up, flexible office providers are ratcheting up their offers during the summer months. Gemma Foord, Head of Serviced Office Agency points out that some providers are offering ‘Golden Hello’s’ to new tenant’s. “Offering up to six months’ rent free is certainly piquing interest with some of our clients – a loss leader, not if it achieves loyalty in the long-term”.

Finally, the Brexit rollercoaster ride is about to pick up pace as we head towards the October negotiation deadline.  Whilst the mass exodus of businesses has not materialized, the uncertainty and lack of information coming from the UK and EU is causing consternation for firms trying to plan for their future space needs. The coming months should provide more clarity but where will the ride end.  What Brexit has become is a facilitator of change in the market – bringing flexibility to the fore for clients and landlords alike.    

To find out more and review our latest market analysis see attached report and for further information or data please get in touch.

Our report can also be downloaded here The Occupier – H1 2018 Review.