The London office market has seen many ups and downs over the last few years. But what were the highlights for 2012? Knight Frank gave their analysis during an event at the Dorchester Hotel earlier this week. A summary of the highlights is shown below.
The investment market has always been relatively strong for London offices, but last year was the strongest in five years. This was mainly fuelled by overseas investors, who were involved in almost three-quarters of all deals which equated to £9.6 billion. This is a significant increase on 12 years ago when foreign investors only accounted for a quarter of all deals.
The total investment turnover for the London office market was £13.8 billion, which is £2 billion higher than the ten year average. The remaining £4.2 billion was made up by domestic investors.
Speaking of the increase in overseas investors in the London office market, Stephen Clifton, an investment partner, said: “Foreign buyers dominating the London office investment market have become an established state of affairs.
“The pound has weakened further in recent weeks, which only increases the logic for overseas investors to buy in London.”
The London office leasing market remained pretty stagnant with vacancy rates only falling by 0.1 per cent and total take-up of 9.6 million sq. ft. in 2012 – a drop of 1.1 million sq. ft. from the previous year. Philip Hobley, also a leasing partner, believes that the vacancy rate remaining steady was due to a “lack of speculative development.”
He said: “A difficult year for the global economy pushed down demand for leasing office space, but what is remarkable is that the vacancy rate did not rise, which has happened in all past recessions, and how strong deal terms have been.”
Media, telecoms and technology companies accounted for the most office take-up with 1.2 million sq. ft. of London office space. James Roberts, head of commercial research at Knight Frank spoke of the findings.
He said: “Technology, Media and Telecoms firms were the largest source of demand of office space in [the] City in 2012, accounting for 22% of activity.
“Also, the insurers who operate in the Lloyds insurance market have been taking more office space, with activity from this industry more than doubling to 878,000 sq. ft. in 2012.”
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