London office lettings surpass expectations
Central London office take-up weathered economic and political uncertainty to reach 10.47m sq ft last year, 10% above the five-year average and a fifth higher than in 2021.
Analysis from Cushman & Wakefield, shared exclusively with EG, found that leasing deals in the capital had exceeded expectations, driven by the banking and finance sector – which took a 20% share of the market – as well as professional services (18%), media and technology (17%) and legal (15%).
Over the year, 604 leasing transactions completed, up by a third on 2021. Sub-25,000 sq ft deals provided a boost to year-end figures, increasing by 47% year-on-year and equating to 528 deals – their highest proportion of the total in more than 10 years.
Central London office take-up weathered economic and political uncertainty to reach 10.47m sq ft last year, 10% above the five-year average and a fifth higher than in 2021.
Analysis from Cushman & Wakefield, shared exclusively with EG, found that leasing deals in the capital had exceeded expectations, driven by the banking and finance sector – which took a 20% share of the market – as well as professional services (18%), media and technology (17%) and legal (15%).
Over the year, 604 leasing transactions completed, up by a third on 2021. Sub-25,000 sq ft deals provided a boost to year-end figures, increasing by 47% year-on-year and equating to 528 deals – their highest proportion of the total in more than 10 years.
Of lettings of more than 100,000 sq ft, 90% were prelets from occupiers looking for larger floor plates that “have to get in early”, Cushman said – a trend the team expects to continue this year.
“Whatever statistics you provide, there are going to be people saying the office is dead – but the reality is now that for two years post-Covid, we’ve seen a substantial rise in take-up,” Ben Cullen, Cushman’s head of UK offices, told EG. “Even based on our own Q3 forecasts, the full year figures have come out 15% higher than we expected three months ago. No one expected that – the agents, the researchers or the market.”
By sub-market, the City led the way with 5.53m sq ft in take-up in 2022, 4% up on the five-year average. This was anchored by deals such as Clifford Chance’s prelet of 326,000 sq ft at 2 Aldermanbury Square; Hogan Lovells preletting 266,000 sq ft at 18-20 Holborn Viaduct; and Kirkland & Ellis preletting 212,000 sq ft at 40 Leadenhall Street.
Take-up in the West End was up 21% on the five-year average at 4.21m sq ft. Significant deals included Blackstone preletting 226,000 sq ft at Lansdowne House; Capital Group taking 220,000 sq ft at Paddington Square; and MSD preletting 196,000 at Belgrove House.
“The bifurcation of the London office market is at its most acute since before the GFC,” Cullen said. “The appetite for the best office space is incredibly fierce, but occupier demands and expectations for their office space are also deepening – location, flexibility sustainability and wellbeing are rising up the list of priorities and are playing an even bigger role in price negotiations – providing much food for thought for developers and landlords.”
In the final quarter of the year, take-up totalled 2.59m sq ft, including four 100,000-plus sq ft transactions, with the City bolstering overall take-up by volume at 1.4m sq ft, compared with 994,592m sq ft in the West End. Prime rental values remained stable across both submarkets, at £120 per sq ft in the West End and £72.50 per sq ft in the City.
Requirements are still coming in thick and fast, Cullen said, with a further 2.76m sq ft under offer and the firm tracking active requirements of 8.5m sq ft across almost 300 searches.
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