West End and City stats show flight to quality
The flight to quality is being felt in the West End and the City, and will become even more pronounced, according to the latest analysis from BNP Paribas Real Estate.
Its central London office leasing data analysis has revealed the resilience of West End and City markets, despite the impact of workforce cuts and energy performance certificate legislative changes.
The firm’s Q4 2022 data shows prime rents across the West End climbing by 19% to £140 per sq ft from £117.50 per sq ft year-on-year. Over the same period they have stayed at £72.50 per sq ft for the City.
The flight to quality is being felt in the West End and the City, and will become even more pronounced, according to the latest analysis from BNP Paribas Real Estate.
Its central London office leasing data analysis has revealed the resilience of West End and City markets, despite the impact of workforce cuts and energy performance certificate legislative changes.
The firm’s Q4 2022 data shows prime rents across the West End climbing by 19% to £140 per sq ft from £117.50 per sq ft year-on-year. Over the same period they have stayed at £72.50 per sq ft for the City.
Across the West End, Q4 2022 saw a 43% increase in take-up at 1.4m sq ft, bringing 2022 totals to 4.3m sq ft and representing a 58% increase year-on-year, significantly above the 10-year average.
Supply decreased by a further 9% to 2.5m sq ft, down from 2.7m sq ft in Q3.
Vacancy nudged down slightly to 4% from 4.4% in Q3, and of that just 0.8% was grade-A, down from 1.2% in Q3. Some 1.6m sq ft of office space completed in 2022, of which 45% was prelet.
However, the picture for take-up has changed. Take-up by media and tech firms has tumbled in the West End, from 41% to 13%. Banking and finance occupiers increased from 16% to 36% and professional services from 10% to 12%.
Simon Knights, BNP PRE’s head of West End agency, said: “As the economic landscape continues to provide a bumpy terrain, some businesses will reduce headcount.
“When the new EPC legislation comes into play in April, we will start to see less appropriate stock shed back on to the market. All setbacks need a solution and the demand will continue to drive the upgrades needed for this stock to be relet. With the big bucks continuing to flock in from the likes of private equity and finance for new and amenity-rich spaces, the West End continues to prove why it will rarely bite back, and you only have to look back to see this.”
In the City, professional services increased from 43% to 45%, banking and finance slipped from 15% to 12% and public sector from 5% to 2%.
Take-up in the City reached 1.2m sq ft across Q4, bringing 2022 totals to 5.5m sq ft – up by 42% compared with 2021 and in line with the 10-year average. Supply in the City decreased by 5% to 9m sq ft, equating to an overall vacancy rate of 10.3%. The vacancy rate for grade-A is 4.3%.
Head of City leasing, James Strevens, added: “Occupational demand for the City has an eagle-eyed focus on quality and amenity, with a desire for premium offices offering superior workplace experiences and, of course, enhanced ESG credentials.
“Professional services have swooped in as we see media & tech losing pole position, and occupiers are showing an increased interest in Cat B ‘plug-and-play’ accommodation across a broadening size range, driven by the need for flexibility, convenience and the avoidance of associated fit-out costs.”
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