Resilient Central London offices – Cushman & Wakefield
Cushman & Wakefield says the Central London offices market was resilient, despite the continued uncertain economic backdrop, with estimated take-up of new office space at 7.3m sq ft for 2012. This compares with 7.8m sq ft in 2011.
Take-up of office space in the West End in 2012 is expected to have fallen 25% year-on-year to just 2.5m sq ft, while City offices and Docklands offices are forecast to have seen a rise in take-up of around 10% year-on-year to 4.8m sq ft, Cushman & Wakefield says, thanks to an upturn in activity from the insurance sector in the City.
In the West End, the acute shortage of Grade A office space led to a jump in pre-letting activity in 2012 with a total of 11 deals compared with the 10-year average of just three, C&W says. The firm thinks the scarce development opportunities in the West End will see Grade A vacancy rates come under more pressure in 2013, and are likely to fall below 2.0% compared with 2.4% in 2012.
Take-up from the insurance sector doubled in 2012 to 18% and a significant proportion of these deals were pre-lets, C&W notes. The sector is locationally sensitive, with insurance companies tending to be sited close to Lloyds of London, the firm points out. Last year a total of 740,000 sq ft was leased to the insurance sector, with a further 300,000 sq ft under offer. Grade A vacancy rates in the City last year were 4.4% and C&W expects this to move out towards 5.0% in 2013 as 2.5m sq ft of Grade A stock is due for completion.
The continued growth of the TMT and insurance sectors, combined with a peak in lease expiries in 2015, will lead to a healthier leasing market over the next 12 months, C&W says, as occupiers are forced to consider their office space options.