Competition is hotting up in the London office market, with space under offer now at its highest level since 2000, thanks to companies, who had previously shelved plans to move, kick-starting their search for new locations in the capital.
Just over 4.1m square feet of space was under offer at the end of March this year – an increase of 84 per cent on the previous quarter and the highest level since the third quarter of 2000, when businesses put offers on 5.9m sq ft of space, figures seen by City A.M. from property consultancy CBRE show.
A total of 2.9m sq ft was signed for over the course of the first quarter, including Ernst & Young’s 200,000 sq ft lease at 25 Churchill Place in Canary Wharf. Meanwhile Dutch bank ING has agreed to take 130,300 sq ft at 8-10 Moorgate, known as the Banking Hall, which is Japanese property firm Mitsui Fudosan’s first development in the City.
Other big deals include Japanese Bank Mizuho taking all 195,300 sq ft of Land Securities' 2 New Ludgate scheme and ad agency Havas going under offer to take all 183,000 sq ft of 3 Pancras Square at Argent's King Cross scheme.
CBRE executive director Chris Vydra, said:
It is clear that the heightened levels of demand seen in the latter half of 2013 have been backed up by more occupiers advancing relocation decisions. This year has started relatively strongly in terms of take-up and under offer levels. The supply crunch has started to bite and rental levels are beginning to rise in line with our forecasts.
Looking further ahead, we expect take-up in 2014 to be boosted by a combination of existing under offers and a high level of active demand in the market.
Rising demand, together with a shortage of new space, has put pressure on rents. West End prime rents (representative of Mayfair & St James’s) increased by £5 per sq ft to stand at £105 per sq ft. Increases were also seen in a number of other Central London markets, including the City, which saw a small increase to £58.50 per sq ft for top normal rents.