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News Release


Tech and media companies seeking pastures new in London

Jones Lang LaSalle Q4 preliminary figures reveal a growing number of West End companies migrating to other areas of London

London, 15th December 2011 - Jones Lang LaSalle has today issued its Q4 Central London preliminary figures, which reveals that a growing number of technology, media and telecoms companies are looking beyond their traditional locations to satisfy their office requirements while other occupier sectors remain subdued.

With prime rent in the West End at £95.00 per sq ft coupled with supply constraints, companies such as Skype, LinkedIn, Google, Saatchi & Saatchi and Ogilvy & Mather are considering other locations such as Midtown, Farringdon and the Southbank where product is available.

Jonathan Evans, Head of West End Agency at Jones Lang LaSalle said: “There has been a steady erosion of high quality accommodation in the West End. Current market activity is focussed on high quality new or refurbished buildings which continue to let despite current economic uncertainty. This letting activity has supported the decision to commence several new developments in the West End this quarter, to take advantage of the paucity of supply.”

Dan Burn, Head of City Agency at Jones Lang LaSalle said: “We expect prime rents in the City core to remain stable into next year with anticipated growth occurring towards the latter half of the year. However, as a result of the migration of TMT sector companies from the West End, areas around the north and east fringe City locations such as Farringdon, Old street and Spitalfields are seeing good levels of demand and are continuing to experience rental growth driven by competition for the best space”

In the investment market, year-to-date, volumes of £4.75bn have been recorded in the West End this year, compared with £5.8bn in 2010 – a decrease of just under 20%. The city investment market has recorded similar levels with c.£4.8 billion transacted year to date, and it seems likely that last years total of £5 billion will be marginally exceeded in 2011.  

Julian Sandbach, Director West End Investment at Jones Lang LaSalle said: “Activity slowed in the second half of 2011 as investors became more cautious about Eurozone volatility and further weakening in the debt markets. Q4 2011 is likely to see £1bn of transactions as investors move to close deals before the year end."

“More than 50% of all transactional activity across Central London in 2011 has been by overseas sources of capital – particularly from private, high net worth investors, family offices from Europe and Asia and Asian Institutions."

“In 2012, supply of openly available investment the West End will continue to remain tight as investors seek to keep exposure to future rental growth, which will keep prime yields stable.”

Other key highlights across the London Office market in Q4 2011 include:

The City

- Year to date take-up volumes total c.3.1 million sq ft compared with 6.1 million in 2010

- Prime rents remained stable for the fifth consecutive quarter, at £55 per sq ft, however, high quality iconic buildings such as the Heron Tower achieving rents in excess of £60 per sq ft.

- Requirement volumes increased slightly, up 5% to 10.2 million sq ft however, many occupiers remain extremely cautious due to the current European economic climate

The West End

- Year to date take-up volumes total c.2.8 million sq ft compared with 3.7 million sq ft in 2010

- Prime rents remained stable at £95 per sq ft, with rent free periods remaining at approximately 16 months for a ten year term.

- Overall supply remains tight and Grade A vacancy rates are currently 2.4 percent - well below the long term average of 3.1%. Overall vacancy rates are currently at 4.5% compared with a long term average of 5.9%

- Occupier demand continues to be driven by the TMT sector, accounting for 65% of the total