Jones Lang LaSalle says 2.5m sq ft of office space in Central London was let during Q1 2013, the highest total since the end of 2010. The 863,000 sq ft forward sale to Google at King’s Cross certainly boosted this figure, but JLL says “demand does appear to be on an upward trajectory”. The firm also sees increasing signs that take-up of Central London offices will rise further during the rest of the year.
At the end of Q1 2013, the amount of space under offer was the highest for 18 months at 1.9m sq ft, and active requirements (adjusted for the Google deal) were up 13.6% over the quarter. Jones Lang LaSalle says the TMT sector is still the most important driver of this demand, accounting for 29% of the total compared with a historical average of 17%. But the firm also notes that demand and activity are increasing from the financial services sector.
Companies are still taking longer than usual to make decisions, says Neil Prime, lead director UK office agency at JLL, but as demand and take-up improve, they will have less choice and will have to act faster to secure their preferred properties. “Whilst we expect the recovery to be gradual initially, assuming a continued and improving sentiment in the global economy we could see a significant change in the supply/demand dynamics towards the end of this year and through 2014,” he adds.
Rents for West End offices rose in Q1 2013, for the first time in almost two years, as a result of rising demand and the continued scarcity of Grade A space in central locations, JLL says. The firm calculates that they reached £97.50 per sq ft in the quarter, up from £95.00 per sq ft, while City offices rents remained at £57.00 per sq ft. Despite this, supply overall increased 12.1% year-on-year during the quarter, and construction began on around 1.5m sq ft of new office space in Central London, including three major schemes in the City and the West End