Big corporate deals for London HQs has caused office leasing volumes to surge by almost 25 per cent.
The post-pandemic return to the office is in full swing, with central London take-up rising by 24 per cent this year.
Of the increase, demand for high-quality space in the capital has skyrocketed with 60 per cent being for new or refurbished areas.
Figures published by Knight Frank today shows that despite the increase in uptake to almost 11m sq ft, the figure remains below long term average of 12.3m sq ft, due to delays in office completion.
Big corporates have however moved back into the City, with demand for ‘best-in class’ offices up 27 per cent. Take up for new or refurbished space was at 6.5m sq ft, or 60 per cent of the overall.
Among 2022’s biggest deals were for US financial services giant Capital Group which penned an agreement for the newly-developed Paddington Square, a 225,000 sq ft site over nine draws.
Aviva also moved into the Square Mile, with a 80,000 sq ft workspace at EightyFen, while financial services firms were the key driver in the West End, accounting for 35 per cent of transactions.
The legal sector made some big moves with 1.4m sq ft of space bought by the sector, up from 2021, driven by Clifford Chance who are now in Great Portland Estate’s 2 Aldermanbury Square, and Kirkland & Ellis, who will buy a 215,000 space at 40 Leadenhall.
Despite economic turbulence, the fourth quarter of 2022 has included almost 2.4m sq ft of office space being both up, with 2.8m sq ft under offer for next year.
“Companies are having to navigate two new challenges; evolving a new strategy of flexible working patterns that support the wellbeing and productivity of their workforce and client service; whilst looking to engage and address ESG targets, both from a commitment and cultural vision perspective”, SAID Philip Hobley, head of London Offices at Knight Frank.
“This has pivoted the focus to new, higher quality buildings capable of delivering more dynamic workspaces ahead of leases expiring, in response to a constrained development pipeline.
We estimate a c.10 million sq ft shortfall between now and 2026, based on a visible pipeline of c.15.9 million sq ft, of which c.3.5 million sq ft has been pre-let, set against long term levels of take up of new and refurbished Grade A space standing at c.5.6 million sq ft per annum.”