Central London office market report Q1 2019

Despite a strong end to 2018, the Central London office market experienced a muted start to the year as Brexit continued to fuel political uncertainty.

May 15, 2019

The political uncertainty surrounding Brexit prevailed in Q1 as activity in the Central London office market was muted.

Despite market uncertainty, the general economy performed better than expected, but the flexible extension of Article 50 will continue to prolong doubt and deter business investment.

2.1 million sq ft was let in the first few months of 2019, this was 1 million sq ft down on the final quarter of last year and 14% below Q1 2018 volumes. Pre-leasing had a smaller impact on the market, yet demand from larger occupiers was undiminished with 12 transactions over 50,000 sq ft.

Flexible workspace providers continued to support transaction activity, accounting for 23% of total take-up. TMT was the next most active sector accounting for 21% of space let.

Under-offers rose marginally to just over 3.2 million sq ft, suggesting that the slowing in activity is likely to be temporary and the Central London office market will recover in the coming months.

Supply levels once again increased, equating to an overall vacancy rate of 4.4%. Despite the uplift, supply remains below the 10-year average of 5.5%.

Speculative development rose to 7.8 million sq ft as four new schemes over 100,000 sq ft began construction. This reflects the ongoing positivity for the long-term prospects of the market.

Investment activity was moderate in Q1, with investors taking a pause as Brexit approached. Volumes stood at £2.7 billion which was 27% below the long run average in Central London, however this was 8% ahead of the same period in 2018.

UK investors purchased just under £770 million in Q1, which was down from £1.7 billion in the previous quarter.

In the City, prime rents remained stable at £70 per sq ft, and in the West-End, prime rents remained at £115 per sq ft.

Read more in the Q1 2019 Central London office market report.

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