5 January 2016 | Herpreet Kaur Grewal
Office take-up in Central London is likely to reach 11.9 million square feet in 2016, according to real estate group JLL.
The group says the prediction continues “an exceptional run of leasing activity that began in early 2013”, making it three consecutive years above 11 million sq ft for the first time.
Take-up is well above average in all three London markets, with the City market on track to exceed 6.5 million sq ft, the West End 3.7 million sq ft, and Docklands and East London 1.7 million sq ft.
City leasing volumes have not matched the exceptional volumes transacted in both 2013 and 2014, when take-up reached 7 million sq ft, but they still reflect buoyant occupier demand.
Over the past year leasing activity in the City has been spread relatively evenly across business sectors with service industries (27 per cent), professional (24 per cent) and banking and finance (22 per cent) sectors, accounting for the largest shares.
Meanwhile, a strong final quarter in the West End means that annual take-up is on course for the highest annual total since 2007, boosted by continued strong demand from tech occupiers – Google, Facebook and King.com all acquired large units of space in 2015.
Robust take-up is driving strong rental growth. The strongest growth this year has come in the City where prime rents are up by 12 per cent, now £70 per sq ft. In the West End core of Mayfair and St James, prime rents have increased to £120 per sq ft from £115 per sq ft, with even higher growth in surrounding sub-markets such as Soho, Covent Garden and Fitzrovia.
Neil Prime, head of UK office agency at JLL, said: “It is striking that the City market has performed so well given a relatively modest share of activity from the financial sector. However, with banks and other financial occupiers now representing around 40 per cent of active requirements, we expect to see them exert a stronger influence on the market in 2016, which will only add the pressures on availability of new floor space.”