London office take-up falls as TMT fills space abandoned by financial services

Take-up for central London offices fell by 18% in comparison with this point last year, despite transactional volumes holding steady – reflecting a wider trend in the London office market of space consolidation. In comparison with 2006, the overall occupational footprint of businesses operating in London offices is down by 7m sq ft, despite the incredibly strong take-up volumes we have seen in recent years. TMT companies have bucked that trend, occupying 3m sq ft more than they did prior to the recession, and have filled in neatly for financial businesses, which have reduced their London office footprint by the same amount. Development of new office space continues apace in London – but also, crucially, redevelopment and conversion of offices into alternative use types. Scarcity of London offices is evaporating, with the availability rate now at 6.9% – the highest it has been since the start of 2014. 6.9% Current availability rate in central London 1.2 Percentage point movement in available rate since Q4 2016 2.5m sq ft London office take-up in Q1 2017 -18% Change in take-up vs Q1 2016 Net additions to office supply in the four years up to and including 2009 was 6.8m sq ft – precipitating a short-term oversupply which, combined with economic circumstances, led to steep rental declines from 2008 to 2010. Looking at the same data for 2017, we forecast net additions in that four-year period to be 3.9m sq ft, with conversions helping to maintain equilibrium on supply, and insulate London’s office market from those sharp rental decreases. To send feedback, e-mail graham.shone@egi.co.uk or tweet @GShoneEG or @estatesgazette Image: Vickie Flores/LNP/REX/Shutterstock