Central London Office Market Update Q3 2021
Central London office demand continues to recover, fuelled by growing appetite for modern, sustainable offices that can facilitate businesses’ ESG strategies.
Central London take-up totalled 2.7m sq ft in Q3, which was the highest quarterly take-up since the beginning of the pandemic. While demand continues to recover, take-up remains approximately 11% below the pre-pandemic ten-year quarterly average, reflecting continued uncertainty over return to the office strategies. That said, competition for best-in-class, sustainable space is fierce, which is pushing up prime rents. Grade A vacancy in the West End remains very low, at 3.9%.
Supply has dropped by 5.0% to 17.0m sq ft, equating to a vacancy rate of 7.6% - above the long term average of 6.1%, but below the 7.9% recorded at the end of last year. Whilst still above pre-pandemic levels, tenant-led space on the market has decreased to approximately 17% of total supply (c. 29% including service office space).
The investment market recorded another healthy quarter of activity in Q3, as demand for Grade A offices with potential to fulfil ESG strategies continues to build. Volumes reached £3.2bn, over double that recorded in Q3 2020, and 4% above Q3 2019. Volume YTD now stands at £8.6bn, 108% up on the same period last year and 12% up on Q1-3 2019. Overseas investors have accounted for 65% of Central London office volume so far this year, which is 9% and 15% above Q1-3 2020 and 2019 respectively.