Central London take-up has improved on the previous quarter, according to the latest research from Savills, amid signs that more occupiers are looking to increase their space requirements.
Office leasing deals totalled 2.2m sq ft across 179 transactions at the end of Q3 this year, down by a quarter on the long-term average for Q3. However, leasing activity was up 10% on the previous quarter, showing the highest quarterly take-up so far this year.
Take-up for the year-to-date stood at 6.1m sq ft, down 21% on the long-term average.
Active demand in central London reached 12.6m sq ft at the end of Q3, up 41% on the long-term average. Space under offer at the end of Q3 totalled 3.9m sq ft, up 35% on the five-year average.
Central London supply stood at 22.8m sq ft during the quarter, with a vacancy rate of 8.7%, up 10 basis points on the previous quarter.
Development completions reached 4.6m sq ft in the year to the end of Q3. Overall development completions from now until the end of 2027 are expected to be 29m sq ft, 16% of which has already been prelet.
Occupiers continued to show their preference for better quality office space, with grade-A take-up accounting for 90% of activity. The insurance and financial sector continued to be the main driver of leasing activity, accounting for 26% of space acquired in sq ft terms.
The next largest sector was professional services with a 12% share of take-up, followed by the tech and media sector with 11%.
The largest transaction to complete during Q3 was ICE Futures’ acquisition of 127,000 sq ft on the second to fourth floors at the Sancroft, EC1, on terms which remain confidential at present.
Jonathan Gardiner, head of central London office leasing at Savills, noted that more occupiers are seeking to increase their space needs (44%) than reduce (18%), describing the finding as “a fact which is rarely commented upon in the ‘future of the office’ narrative”.
“Without wanting to put an overly optimistic slant on what is still a challenging market, our Q3 numbers show positive signs of market pick up, with leasing activity and space under offer both up,” said Gardiner.
He added: “In terms of going into the final quarter and next year, the development pipeline is strong. However, 51% of the space scheduled for delivery between now and 2027 is yet to start, and with construction and financing costs showing little signs of abating we anticipate this will result in further delays and delivery challenges for schemes that are not yet under way.”
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