London Midtown Office & Retail Markets
Our extensive research provides a detailed and often unique insight into office and retail markets in London Midtown. In conjunction with Union Street Partners, we also focus on the London South Bank commercial property market.
In Midtown, we track quarterly take-up, availability, future supply and investment activity in WC1, WC2 and Western EC1 and EC4. Our research is backed by the insights of our highly experienced property professionals and is considered among the most reliable and focused for this market.
Our quarterly reports are published alongside our annual 'Centre of London' research, which monitors the area running from the top of Midtown’s northern border at King’s Cross through to the South Bank, and our bi-annual Midtown Retail Bulletin, which provides a detailed insight into the exciting retail and leisure changes in this continually evolving market.
Centre of London 2018-19: What does the future hold?
The Centre of London market closed the year strongly on all fronts. Despite political uncertainties and economic headwinds, both occupier and investment market performance exceeded expectations. The retail market fared reasonably well in what was a challenging year.
Total take-up for 2018 reached 4.02m sq ft, the third highest over the past five years. The occupier sentiment remained resilient and the market was bolstered by 12 large transactions of more than 50,000 sq ft. DAMIT occupiers continued to show robust performance, while serviced office operators are increasingly expanding their footprint across the Centre of London. Availability plummeted by 25% over the year to stand at 2.02m sq ft at the end of the year. It stood remarkably below the long-term average of 3.31m sq ft. At 3.1%, the Centre of London availability rate remained below 5% for the fifth consecutive year. With only 1.15m sq ft of speculative space currently under construction and due for delivery by the end of 2021, the leasing market will continue to be restricted by low availability during 2019.
Turning to investment, London retained its appeal to overseas investors, who were not deterred by Brexit politics. Investment turnover for the Centre of London reached a record high of £6.09bn in 2018 in the face of political turmoil. Overseas capital accounted for 76% of total turnover and, given the weight of capital attracted to London, prime yields remained stable at 4.25%.
The Centre of London retail and leisure market has continued to perform well despite significant challenges facing the sector. With a huge amount of space under delivery, we expect demand will remain steady across the use classes, provided it is delivered in an appropriate format and, crucially, in an appropriate environment.
LONDON MIDTOWN OFFICE & RETAIL MARKETS Q3 2018
London’s Midtown has recorded the highest take-up of office space in a single quarter since 2013. In Q3 of this year, office take-up totalled 900,454 sq ft - 43% up on the previous quarter. It marked the highest level of take-up since Q3 of 2013, and was well above the 10-year quarterly average of 660,583 sq ft. Key lettings during Q3 included:
LinkedIn taking 82,910 sq ft at The Ray Building on Farringdon Road
WeWork at 1 Waterhouse Square (74,948 sq ft)
Live Nation at The Farmiloe Building (64,777 sq ft)
Gaming Technology Solutions at MidCity Pace (53,349 sq ft)
Midtown is now the chosen office location for a broad range of businesses from professional services to tech, creative and finance. It’s a maturing, vibrant core London office market. Occupiers are drawn to Midtown because it’s at the very centre of London. It has great transport connectivity, diverse amenities and a transforming public realm. However, there is now a real risk of the market stalling owing to lack of supply. The low levels of high quality space will offer some significant challenges to our market in 2019 and beyond, as there is not - yet - any significant change in the future pipeline.
The Midtown investment market saw a similarly buoyant level of activity during Q3. Driven by the £1.2bn acquisition of Goldman Sachs’ HQ by Korea’s National Pension Service, the quarter registered £2.6bn of investment transactions – an all-time-high. The Midtown occupational market is performing ahead of expectation, and this is correlating strongly with the investment market. An exceptional Q3 accounted for 60% of the years turnover and brought transactional activity for the year to date to £4.3bn which is already well in excess of the total for the whole of 2017. Overseas buyers still dominate, but there has been some opportunistic buying by domestic investors. It’s clear that some buyers are more concerned about the impact of Brexit than others.
In the retail and restaurant market, the gradual transformation of Midtown continues. Occupational demand remains steady despite market challenges and uncertainty. Take-up of space is driven mostly by food and beverage uses but there is demand across the use classes for the right space.
Farebrother regularly contribute to and host events, receptions, presentations and round table discussions focused on the Centre of London for investors, developers, occupiers and managers. Please contact Adrienne Kearney for further details.