Pre-leasing still strong across London
Pre-leasing continued to dominate the market in 2018 and was particularly prevalent in larger size brackets.
The strong demand pipeline suggests that it is inevitable that pre-leasing will continue to dominate the London markets in 2019.
Dwindling supply pipelines remained an issue for London throughout 2018, which, combined with strong levels of demand for space, meant pre-leasing was a key theme for the year.
In 2018 pre-leasing accounted for just over a third of transactions in the West End and in the City and vacancy rates on new build stock fell below the 10-year average in both markets. We expect pre-leasing to remain prominent in 2019.
Broadgate, EC2, has seen significant pre-leasing activity with 85% of the space due for delivery in 2019 and 2020 now pre-let or under offer, demonstrating the strength of the pre-let market.
We advised British Land and GIC on the repositioning of Broadgate to deliver buildings with broad appeal with significant amenity provision. Activation of the public realm and an improved food & beverage offering have helped change occupiers’ perception of Broadgate. Having a flexible offering has also been a key attraction for pre-lets, with Storey, British Land’s own brand, providing flex for customers.
Twentytwo Bishopsgate, EC2, arguably one of capital’s most anticipated developments under construction, exemplifies the pre-leasing phenomenon. In 2018, Hiscox and Beazley, two major global insurance businesses, signed-up to take a total of 125,000 sq ft at the 62-floor tower prior to its completion in 2019. In addition, AXA Investment Managers are also relocating to the building with over 150,000 sq ft of space under offer.
The leasing team advised PNB (Permodalan Nasional Berhad) on the disposal of the entire office accommodation at Aviation House, WC2, comprising c.130,000 sq ft over the lower ground, ground and eight upper floors. Following a short and successful pre-completion marketing campaign, we ultimately succeeded in negotiating a pre-let on a new 20-year lease with WeWork for the entire office accommodation.
Looking forward we expect pre-leasing to remain a prominent feature of the market due to an imbalance in the level of supply and demand for new build space. The new build vacancy rate of 0.5% is less than half the 10 year average, which means many occupiers will need to look further ahead to secure their preferred accommodation.
With demand for space across Central London currently standing at 9.0 million sq ft, and as occupiers become more strategic about their real estate portfolios and incorporate longer lead times into their searches, there needs to be an increased focus on delivering pipeline supply into 2021.
This article was written by Neil Prime