Riders on the Storm & Winds of Change

‘And Yet It Moves’ 

CLEARLY Italian astronomer Galileo, was not thinking about the London Office market when he muttered these words under his breath. However, despite some of the initial fearmongering after the EU referendum, the London office market still ‘moves’. But in spite of the recent activity, future forecasts suggest that 2017 might present favourable conditions for occupiers…  

The evidence from the first full quarter since the UK’s decision to BREXIT in June indicates that the Central London office market remains cautious but despite these challenging conditions there has still been activity. Our website has received a 20 % increase in visitors over the last quarter, as businesses make enquiries to see what their options are and whether market conditions might now be more favourable for a move.      

In Q3 2016, take-up of new or refurbished stock remained high and rents were broadly strong. CoStar recently reported that in Q3, rents in The City on sub 10,000 sq ft units held firm and headline rents were at £72.50 per sq ft. In the West End, prime headline rents remained unchanged quarter on quarter and look set to end the year at similar levels. 

Due to the scale of Apple’s pre-let at Battersea Power Station, TMT was the most active sector, accounting for 47% of total transactions in the West End, followed by the financial sector with 9%. 

However, despite a good level of activity in the second half of the year, the forecasts are that supply levels of office space are increasing as we move into 2017 and this will be a true test of the market; where headline rents could begin to decrease slightly and incentive packages could move out. 

Availability across Central London is rising. In the West End it has risen for the third consecutive quarter to 6.5 m sq ft and in the City it increased for the second consecutive quarter, albeit marginally to 7.6 m sq ft. Levels of supply in the West End are now the highest in more than five years and this is mainly down to 1.1 m sq ft of second-hand supply coming onto the market. These factors combined with recent complex global and national economic and political changes, are likely to make matters more uncertain for landlords. 

Therefore 2017 MIGHT present occupiers with an opportunity to activate a search to at least understand what type of packages are available. Some of you may prefer an interim solution – either requesting a short-term extension from your current landlord, or to take flexible leases from a new landlord. Alternatively, the other option would be to look at a longer term option with the hope of benefitting from softer market conditions.