Demand for prime offices drives down vacancy rates west of London
Take-up of office space rebounded during 2010 in the Western Corridor, says Jones Lang LaSalle, with almost 2.1m sq ft of offices let in the region west of London. The firm’s latest research into the sector in this area shows that take-up was 65% above the 2009 level, although it was also 12% below the five-year average level.
The strongest activity last year was seen in the third quarter, which was boosted by several large deals. In the final quarter take-up reached more than 410,000 sq ft. Most office leasing activity in the area related to offices below 25,000 sq ft in size, with the average deal size at 19,700 sq ft. Jones Lang LaSalle says occupier activity remained driven by the manufacturing and services sectors. The IT subsector was the most active in the final quarter, taking 44% of the total at more than 180,000 sq ft.
James Finnis, head of National Offices at Jones Lang LaSalle, said that deals were generally driven by lease events last year, and consolidation decisions rather than expansion. He noted that town centres remained the focus of occupier activity. “Grade A space remains in demand with occupiers taking advantage of the opportunity to upgrade their space at competitive packages; take-up of this space totalled over 1.2m sq ft, which is 60% of the total take-up during 2010,” he added.
Finnis said the development market was starting to react to the sharp fall in vacancy rates across West London, with the firm now seeing the start of a speculative development pipeline in some key locations. The vacancy rate for the region was 14.2% in Q4 but this masked sharp differences – in the Thames Valley, vacancies were at 20.1% whereas in West London the figure was 8.5%. Looking at Grade A properties alone, the vacancy rate in West London was just 3.3%, while in the Thames Valley it was 8.6%. “Assuming occupier demand remains robust we are forecasting a pinch point in Grade A supply in a number of centres in 2012 – this will drive rents forward with headlines rents showing real growth and incentive packages reducing rapidly,” he noted.
