Demand For Office Space In Central London Strongest For Six Years

The first quarter of 2019 saw take-up of office space in central London at its strongest for six years, as it continues to outperform expectations. Savills reports 1.16 million square foot of new lettings being agreed in the City of London. In the West End, 42 transactions completed in March alone took total activity for Q1 2019 to 98 office lettings. In the City, there were 100 occupational deals for the year to date, of which 33 completed in March. The tech and media sector accounted for the largest share of take-up in the West End, at 25 percent, while the City benefited from a surge of serviced offices.

The insurance and financial sector and serviced office providers were also active (both accounting for 21% of square foot take-up activity) with the Financial sector accounting for a quarter of all deals (by deal number) to complete in the first quarter.

Ed Betts, co-head of the West End office leasing team at Savills, says: “The increased competition to secure the best West End space, fuelled generally by lease events but also by a growing awareness among occupiers of supply constraints, is beginning to reflect on rents in certain sub-markets. In the first quarter we have achieved an average prime rent of £119.30 per square foot, up 13% on Q1 2018 and the strongest average prime rent seen since 2017.”

In the City, Savills says the Serviced Office Provider sector accounted for the greatest proportion of office take-up (20% of all square foot take-up) followed by Insurance & Financial Services (18%). The firms figures suggest a slow start among the Tech and Media sector which accounted for just 10% of all Q1 take-up in the City. At the end of March the City had a vacancy rate of 5.2%.

Commenting on the City market, Philip Pearce, head of the central London office agency team at Savills, adds: “The City’s office market remains stable with low supply levels and continued stronger-than-expected demand, resulting in rents remaining consistent in the high £70’s per square foot for prime. Of the deals signed in the first quarter, 45% have been for 10 years or more which is further evidence of the ongoing resilience of the market despite Brexit uncertainty being delayed further.”