London’s Midtown office market makes strong start to 2017
9 May 2017
The take-up of office space in London’s Midtown spiked sharply in the first quarter of 2017. The amount of space let in Q1 was up 58% year-on-year as take-up totalled 681,164 sq ft.
Leasing & Development Partner, Jules Hind, comments: “In the first quarter of 2016, the market was already experiencing a hiatus ahead of the EU Referendum vote, but 12 months on, the beginning of this year has seen a more normalised environment. Take-up was ahead of the long-term average and at the highest quarterly level since Q3 2015”.
The absorption of Midtown office space was driven by three substantial transactions, two of which have been agreed during construction - McKinsey taking 97,000 sq ft at the Post Building WC1 and COS leasing 60,500 sq ft at 1 New Oxford Street WC1 – while ITV signed for 88,000 sq ft at 2 Waterhouse Square, EC1.
The overall availability of office space tracked up from 1.6m sq ft at the end of last year to 2.1m sq ft by the end of Q1 2017. Jules Hind comments: “This availability of space was substantially fuelled by the completion of new Grade A space in schemes such as the 65,600 sq ft Cursitor Building and the 98,700 sq ft 28 Chancery Lane.
“Given that there is sustained demand for this type of product, we would expect availability to reduce as the year continues.”
In contrast to Midtown leasing activity, the location’s investment market had a quiet start to the year with £625m of deals transacted – 44% down on the final quarter of last year.
Investment Partner, Alastair Hilton, comments: “The current political and economic scene within the UK and globally makes it a difficult market to read, but there is still strong demand for the right product and prime yields remain at circa 4.25%.
“Far Eastern capital has been active across Central London, including Midtown, and most recently we saw a private Hong Kong investor pay £23m for Craven House in Kingsway. This reflected a net initial yield of 3.53% and a capital value of £1,054 per sq ft – the highest of the quarter.”
Senior Partner, Alistair Subba Row, comments: “Midtown remains a remarkably resilient market whose strength comes from the diversity and quality of its occupier base. Many of the professional services firms which make their home in the area are closely involved in the ramifications of a Brexit and we expect that activity to fuel further occupier demand.
“However, the future will also bring business consolidation and some occupiers will move staff out of London ahead of the UK exiting the EU. So there is a real and present need for Midtown stakeholders to work together to ensure that this pivotal London location maximises its strength and addresses any vulnerability caused by the changing status of the UK in Europe.”