EG LONDON
the last word Deal pressure is back
TOM PILKINGTON HEAD OF LONDON OFFICES EGi
Few would call me an optimist, but over the past month I have finally felt like things might be on the up for the London office market, or at least the City Core. At the end of the first quarter we
reported that the market might not be as rosy as the numbers appeared, with
10 12 14
0 2 4 6 8
SQ FT (M)
32% of the overall take-up figure of 2.7m sq ft attributed to just one deal. Since then, however, there appears to
have been an improvement, with deals close (if not complete) for 210,000 sq ft at 60 Holborn Viaduct, and 110,000 sq ft at 122 Leadenhall Street. The total of these deals would be only slightly less than the five biggest deals of Q1 were the Google deal to be removed from the reckoning. In isolation, perhaps it doesn’t sound
like a great deal to get excited about but, when you take into consideration the
AVAILABILITY (EXCLUDING SECOND-HAND) CITY V WEST END BY QUARTER CITY CORE
WEST END
dwindling levels of good-quality stock in the market, combined with the level of requirements, we find that those who have been holding off making a decision suddenly feel pressure to take the plunge as competition returns to the market. This scenario will be of particular
concern in the City Core, where the level of new, under construction and pre- marketed stock remains low. Further, the figure for the City Core
includes 1.3m sq ft at the stalled Pinnacle development on Bishopsgate. Couple the low level of stock with an increasing appetite for space in the Core and one can predict higher take-up figures than have been seen in recent quarters, and possible rental growth. Away from the City Core, rents may hit
the £130 per sq ft mark this year in the West End, according to commentators, but this will occur only in the small unit market, and it will hide a far gloomier outlook for the area (see feature, p8). The West End had a tough start to the
Source: EGi London Offices Q1
2008 2008 2008 2008 2009 2009 2009 2009 2010 2010 2010 2010 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2011 2011 2011 2011 2012 2012 2012 2012 2013 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
“The City Core can look ahead with optimism, unlike the West End”
year, with take-up down on an unspectacular Q4 2012. While the amount of available new, under construction and pre-marketed stock remains fairly constant, the level is still low. In addition, with development occurring on the periphery, the product is not necessarily one that the market is seeking. Furthermore, while Boris Johnson may
have secured exemptions from the changes to the planning system that will facilitate easier conversion from office to resi, the threat still remains, and nowhere more acutely than in Westminster. As I write this, our planning team has
informed me of another one getting under way – 7 Portland Place will lose just shy of 10,500 sq ft of office space to residential. The City Core can look ahead to the
second half of the year with renewed optimism, but the West End will be looking east with concern.
42
www.estatesgazette.com
8 June 2013
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