‘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…
Riders On The Storm…
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
The Winds Of Change?
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.
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.