JLL - Central London office take-up surpasses 5m sq ft

JLL - Central London office take-up surpasses 5m sq ft

July 18, 2018

JLL's latest research has found that office take-up across Central London reached 5.1m sq ft at the end of Q2 2018, representing a 4% increase on the first six months of 2017.

According to JLL, take-up for Central London's office market in Q2 2018 was 2.7m sq ft, a 6% fall compared to the corresponding quarter of 2017 but a 22% increase on the average Q2 total over the last 10 years. Q2 2018 saw take-up reach 1.6m sq ft in the City of London, whilst the West End recorded 1.0m sq ft of transactions, representing decreases on Q2 2017 of 5% and 18% respectively.

The continued rise in the demand from flexible office providers has seen the sector maintain its position as London's fastest growing occupier group. In the first half of 2018 the service industry, which includes flexible office providers, had acquired 1.4m sq ft of new space, accounting for 27% of activity. TMT accounted for 18% (904,000 sq ft) of space transacted in the first two quarters of the year whilst, professional services and banking and finance recorded similar levels of take-up, representing 16% (840,000 sq ft) each. Due to the significant sale of the 600,000 sq ft Royal Mint Court, in the City of London, to the People's Republic of China for their new embassy, deals undertaken in the institutional sector accounted for 17% of activity in 2018 to date.

In the first half of 2018 JLL cited that a third of the transactions completed across Central London were undertaken on a pre-let basis. This is a trend that is expected to define the rest of the year given that supply levels are below average in both the City and West End.

Active demand for space totalled 10.2m sq ft at the end of Q2 2018, according to JLL's research, 28% above the 10-year average and broadly unchanged from last quarter. Much of this demand is focused on future supply as occupiers are increasingly beginning their acquisition processes much earlier than has previously been seen.

Neil Prime, head of Central London Office Markets at JLL, said: "The take-up figures for the first half the year are significantly ahead of the 10-year average and reflective of the figures seen at the same point in 2017, which given the political headwinds the capital faces is encouraging. Even with these uncertainties sustained demand remains robust across Central London from all sectors, but particularly from banking and finance, which currently accounts for more than a third of requirements in the City. However, we will continue to monitor occupier confidence and activity closely as the year unfolds. "

"Pre-leasing continues to dominate and, assuming this trend continues, will significantly reduce the future supply of new space in both the City and West End markets as these occupiers pre-let the schemes due to be delivered in 2019 and beyond. Occupiers are becoming more strategic around their real estate portfolios and incorporating longer lead times into their searches. Therefore, the delivery of supply into 2021 and 2022 is increasingly an opportunity for investors to satisfy these sustained levels of occupier demand."