London Office Market Q3 2019

The London Office market saw an increased level of letting activity in Q3 2019. Overall quarterly take-up rose by 13% from the 2nd quarter to a 12-month high. Appetite for pre-letting is growing as occupier concern over supply shortages, encourages deals to conclude at an increased rate, with 1.3m sq ft of London office pre-lets concluded in Q3.

Absorption levels are more subdued as a high proportion of secondhand space is bypassed in favour of new builds. However, the good new for the fit-out industry is that confirmed major pre-lets for schemes completing in 2020-2022, include G-Research, Cooley, Bridgepoint, Splunk and Millbank increasing the size of their floorspace in their pre-lettings.

Central London office market vacancy levels have has edged below 5% for the first time since early 2017, with availability of completed recently new/refurbished space just above the all-time record low for London.

Recently emerging separate requirements for over 100,000 sq ft, across the entire London market, prioritising product availability over include occupiers such as IBM, BNY Mellon, Mastercard, The Telegraph
and Kingfisher.

The City office market has seen an increased level of demand. In the last three months deals to BT, Monzo, ICG Longbow, Urban Outfitters, ION and Reinsurance Group of America have boosted Grade A letting activity surpassing 1 million sq ft for the first time in nearly 20 years. Rival flexible offices providers are also active with Knotel pre-letting 82,000 sqft at City Place House, Uncommon forward purchasing Templar House WC2 (140,000 sq ft)and Convene taking over 100,000 sq ft at 22 Bishopsgate, EC2. The pipeline in the City of London is set to see 2.5 million sq ft of speculative space delivered up to the end of 2021. Future large-scale schemes not under construction will not impact the market until 2022 at the earliest.

The West End also saw take-up improve in Q3, to 1.0 million sq ft, with pre-letting activity accounting for 30% of lettings including Diageo, Bridgepoint and Nationwide Digital. Vacancy rates rose very marginally, but the future pipeline includes 3.5m sq ft to be delivered up to end of 2020, albeit that 80% of that is pre-let.

There are only three speculative schemes over 50,000 sq ft set to be delivered up to the end of 2020.