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Release of pent-up demand driving market recovery says Jones Lang LaSalle
Research released today by Jones Lang LaSalle reveals that economic recovery in London continues to gather momentum, with businesses increasingly prepared to invest for future growth.Take-up of office space in the City of London soared to 1.95 million sq ft in Q2, from 1.1 million in Q1, an increase of 82%. This made Q2 the strongest quarter since Q1 2010. In the year-to-date, occupiers have taken up 3.0 million sq ft of office space in the City, the highest level of activity since 2007.
Dan Burn, Director of Office Agency at Jones Lang LaSalle said: “The strong Q2 figures were driven by a number of significant deals, which demonstrates the growing confidence in the occupier market. In addition to the continuing erosion of current supply, which will drive competition amongst occupiers to secure the best space, the top four deals of the quarter were all pre-lets or pre-completion lettings which is hugely encouraging.
“Despite the strength in activity in Q2, the amount of office space currently under offer grew by 23% to 1.6 million sq ft, which is testament to the strength of the recovery in demand. Having delayed decisions on their requirements during 2011 and 2012, we are now seeing the release of pent-up demand for office space in the City. The biggest issue moving forward will be the lack of “oven ready” and deliverable schemes which will put pressure on those occupiers now looking to secure premises for occupation from 2015 through 2018.”
Ben Burston, Head of UK Office Research at Jones Lang LaSalle concluded: “Our data shows that London is leading the broader UK economic recovery. Businesses in the City exercised caution during 2011 and 2012 and delayed committing to new office space, but the swing in sentiment has seen them move rapidly to seize the opportunity to expand or upgrade their office accommodation. Underlying demand remains strong despite the burst of activity seen in Q2, and we expect leasing activity to remain strong as we move into the second half of the year. This will bolster our anticipated growth in rents.”
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