Take-up of Central London office space increased by 4 per cent during the third quarter, reducing availability to 16.9m sq ft. The rising leasing levels have prompted CBRE to forecast intensifying competition for space as office based employment in the capital continues to rise and supply falls.
The highest levels of take-up were recorded in the West End and the City at 1.2m sq ft and 1.1m sq ft respectively. The Southbank (0.8m sq ft) and Docklands (0.3m sq ft) also performed well, with both exceeding the 10 year average. Midtown (down from 0.6m sq ft to 0.2m sq ft) was the only area to experience a fall in take-up.
As a result, availability fell to 7.7 per cent from the 8.1 per cent recorded in the previous quarter. The largest fall in supply was seen on the Southbank following a number a significant deals. The figure currently stands at 1.4m sq ft, while the West End (4.9m sq ft) and Docklands (1.7m sq ft) also saw a decrease in supply.
In the City and Midtown, availability increased slightly, but this rise takes into account soon-to-be completed development schemes like the Leadenhall Building and 20 Fenchurch Street. Next year completion levels will peak, with fewer buildings expected to be completed in the following years.
With improving economic growth helping London to outperform the rest of the UK, this new supply coming onto the market is expected to be absorbed quickly leading to a further fall in availability. This will result in reduced choice, meaning that businesses must act fast if they are hoping to find office space in the capital.
This intensification of competition will clearly have an impact on rental growth. While prime rents remained largely unchanged during the third quarter, CBRE predicts that increases will be pronounced in 2014 if the current market activity continues.
