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.
Click to read Central London Office Market Update Q3 2021
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