Leasing deals for London office space close to the size of six Gherkin towers are at an advanced stage in an encouraging start to the year for the capital’s developers and army of property agents.
Many landlords have seen tenants review their real estate portfolios, with some downsizing as they embrace more hybrid working and need less space. But many others want to ditch older HQs and move to more modern space and buildings with stronger environmental credentials.
New research today points to solid demand for London offices, even if staff will only be in them for part of the week.
Property agent JLL calculates around 3.1 million sq ft of office space was under offer across central London at the end of last month. To give some indication of that size, the Gherkin at 30 St Mary Axe is around 500,000sq ft.
There was 2.9 million sq ft under offer at the same point in 2021, and 2.5 million sq ft at the end of December 2019 before the Covid-19 crisis.
Chris Valentine, JLL’s head of central London office agency, said: “We begin 2023 with a significant amount of space under offer and sustained demand for quality space. Occupiers remain committed to securing the best-in-class space that aligns with their long-term business objectives.”
The firm’s provisional data also shows City and West End lettings totalled around 10 million sq ft last year. That is 23% ahead of 2021, and in line with the 10-year average. However it is still below the pre-pandemic 11.6 million sq ft recorded in 2019.
Deals inked in 2022 included pharmaceutical giant GSK agreeing to move to a new HQ in 2024 on the corner of New Oxford Street and Earnshaw Street, and landlord British Land securing law firm Reed Smith to take space at its new Norton Folgate development next to Spitalfields.
Valentine added: “London maintains its global importance as an office location.”
There is some 8.6 million sq ft of active demand for new office space across central London, with the professional services sector making up the largest share of this at 29%. However JLL’s Jeremy Attfield warned: “Whilst the market fundamentals remain strong, central London will continue to face challenges.
“Economic uncertainty is expected in the first half of the year, and this will likely have an impact on transaction volumes in the short term. In addition, as businesses review their real estate needs, we will see more tenanted release space becoming available which will impact the overall vacancy rate. We expect to see more stability in the second half of the year leading to an uptick in leasing volumes.”
Michael Pain, head of the tenant advisory team at property firm Carter Jonas, said: “Despite the current uncertain macro-economic climate, advertised rents on some of the best in class Grade A buildings have been gradually rising since mid-2021.”
He added: “Demand in the central London office market is proving quite resilient and is being fuelled by those tenants seeking to downsize -and those wishing to trade up in to better quality space.”