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GVA - Central London office analysis

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Labelling 2014 the ‘year of the pre-let’, award winning commercial property consultants GVA, report on central London’s office space market in the third quarter of 2014.

They claim that, with 9.2 million sq ft of completed transactions up to Q3, and over 3 million sq ft under offer, 2014 will have likely seen take-up reaching its highest since 2001.

Forward planning has driven market activity with a third of take-up attributed to pre-letting. This has, in turn, has broken down the construction pipeline – over 40% of the 12.3 million sq ft of office space currently being built at the end of 2014, had already been let.

According to GVA, the phenomenon is particularly interesting in the West End – which, historically, experienced very little pre-letting.

Another consequence of the trend, is the resultant demand for buildings that are fully available on completion. ‘Buildings such as 15 Sackville Street, which had previously experienced letting voids, have now become fully let or under offer.’

The report claims that during Q3, rents increased in the majority of the central London’s submarkets – with prime rates in the core at £60 per sq ft and ‘tower floors’ gaining in excess of £70 per sq ft.

For Q3 2014, the central London occupier market experienced its highest take-up rate for ten years (making up 40% of total take-up), with the City fringe seeing the greatest trade, above average take-up in the city core and a 9% increase in the West End fringe. 

Vacancy rates have been decreasing gradually and were recorded at 5.1%, and of the office space currently under construction (12.3 million sq ft), 42% has been pre-let, leaving only 7.1 million sq ft available to market.

GVA also record the prime rents index for central London at ‘8% above it’s previous Q4 peak’.

In terms of investment potential in central London, GVA report ‘ a reasonable amount of available investment/development stock on the market’ with a considerable number of large and smaller assets on the market and  a steady supply of West End residential conversions and multi-let management opportunities in the City.

Occupier rates for Q3 2014 in the West End are 9.3% up on a 5 year average with 7.3 rental growth year on year and in the City, take-up was the highest in 10 years at 2.6 million square foot. The Docklands saw good take-up of 758,800 sq ft – making 2014 the busiest year since 2010.

 


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GVA’s award winning Research team provides high quality research and analysis to the business and its clients. Our market commentaries, thought leadership pieces and consultancy advice drive industry debate, distinguish GVA from its competitors, and add value for our clients.

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