TAKE-UP of central London offices fell by 27 per cent in 2011 compared to the previous year, as the global economic slowdown continued to take its toll, according to research by Knight Frank.
The property consultancy said take-up fell to 10.7m square feet last year.
However, this coincided with a fall in supply and doubling of demand from the technology sector, providing some reason for confidence in the long-term outlook.
Companies including Apple, Expedia, Facebook and Groupon signed deals for 1.3m sq ft, up from 640,000 sq ft the previous year, despite a slowdown in demand from other industries, particularly finance.
Knight Frank said that rising technology firm demand was a “London-wide phenomenon” and not restricted to the Shoreditch area coined as the “Silicon roundabout.”
However, the supply of central London offices continued to fall by 1.5m sq ft in 2011 to 16.9m sq ft with supply having peaked in 2009 at 23m sq ft.
Tim Robinson, leasing partner, said the leasing market had fundamentally changed and that the reduction in pace in the sector is like comparing a 20:20 cricket to a test match cricket: “It is a slower game with the odd burst of excitement.”
He added: “If demand is no better than last year, I expect supply to continue to fall in 2012 and 2013.”
Knight Frank’s quarterly report also revealed that a third of all of the £9.1bn of central London office investments last year were carried out by first-time buyers as “a new world order of international operators” continued to flock the market.
Stephen Clifton, City investment partner, said 60 per cent of last year’s acquisitions had involved overseas equity, with the “hottest money” currently coming from Malaysia, Korea, Hong Kong and Russia.
“Up until now the overseas money has targeted trophy assets, but I expect them to diversify their portfolios this year taking on more risk, either buying sites or joint venturing with UK developers,” he said.
Office investment transactions fell to £9.1bn compared to £10.4bn in 2010, in part due to a relative lack of supply.
Central London Lettings market
Take-up fell by 27 per cent to 10.7m sq ft last year
Take-up of central London offices from IT and telecoms firms more than doubled to 1.3m sq ft. Accounted for 20 per cent of all transactions.
Availability of central London offices fell by by 1.5m sq ft to 16.9m sq ft. Vacancy rate
of 7.3 per cent compared to 8.1 per cent in 2010.
Investment
£9.1bn of central London office investments last year, a 12 per cent fall on 2010 (£10.4bn)
First-time buyers accounted for a third of deals
Overseas investors accounted for 60% of turnover
“Hottest money”: Malaysia, Korea, Hong Kong and Russia.
