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Take-up spikes in London’s Midtown but market remains hard to read

Take-up spikes in London’s Midtown but market remains hard to read

18 July 2017

In the second quarter of 2017, office take-up in London’s Midtown market rose by 30% quarter-on-quarter.

Our latest market update shows that 883,768 sq ft of offices were leased in Midtown during Q2 while the availability of new and refurbished space decreased by 31% to  748,949 sq ft. However, the supply of second-hand space rose by 38% to 1.34m sq ft.

Presenting its latest analysis of the market, Jules Hind, Leasing & Development Partner, commented: “The Q2 take-up performance reflects good demand across a wide spectrum of space requirements and this shows that occupiers have a clear preference for new or refurbished space.

“The increase in second-hand space tells a different story, and indicates that businesses who are trying to divest themselves of surplus space may struggle unless they can be flexible about terms.”

Notable transactions which completed in Q2 included Framestore’s acquisition of 88,231 sq ft of space in Viridis Real Estate’s development at 28 Chancery Lane WC2; and Disney Corporation’s commitment to 47,543 sq ft at Lacon London in Theobald’s Road WC1.

As it has done across Central London in recent months, the serviced office operator, WeWork, continues to make a major impact on the office dynamics and in Q2 signed for 140,000 sq ft at Almacantar’s 125 Shaftesbury Avenue, WC2.

Jules Hind comments: “With the latent demand present in the market, we expect take-up in Q3 to be similarly robust but after that it is hard to be exact as to how the market will proceed through to the end of the year.

“We reported a year ago that it would be increasingly important that the pricing and quality of office space is precisely aligned to occupier requirements. That remains true today.”

In terms of the investment market whilst Central London volumes have remained strong, Midtown has been hampered by a lack of supply. Only £164m of investment deals completed in Q2 which was 74% down on the volume transacted in the previous quarter.

Alastair Hilton, Partner and Head of Investment, comments: “There were few active sellers in Q2 and that has meant that volumes were well below the 10-year quarterly average of around £600m.

“More encouragingly, there are now some larger asset sales coming to the market, including Aldwych House, 10 Bloomsbury Way and Athene Place and these should improve market volume as we look ahead. 

“Behind this the market for the smaller lot sizes remains robust with Investors willing to place capital, albeit subject to sensible pricing.”