According to real estate analysts at DTZ, businesses are beginning to gain a greater degree of confidence in their prospects going into 2011 but, with fewer speculative developments getting started, demand for office space in London is on the rise.
This trend is evidenced by the company’s figures showing take-up rates on central London office space reaching 3.7 million square feet in the third quarter of this year, compared with 2.8 million square feet in the previous three-month period.
Construction of roughly two million square feet of office space is expected to be completed next year, which is much less than the typical annualised figure because investor appetite for speculative developments dropped sharply in late 2008, immediately after the global financial crisis.
“If take-up continues at its current level, with only two million sq ft of speculative space being delivered in 2011, we expect the current strong upward pressure on rents to be sustained,” said Martin Davis, head of UK markets research at DTZ.
Looking at London’s main financial district in particular, the research firm noted that leasing activity in ‘the City’ has been very strong in recent months and that availability is better in the Square Mile than in rival areas of central London.
Meanwhile, a report from Cushman & Wakefield recently rated London as being the best city in the world in which to do business, with the value of its rented office space among the main reasons why it was given the top spot.
Editor’s notes: Data released in 2023 showed that take-up by office letting deals in the third quarter of 2022 was 2.5 million square feet and the total central London take-up figure for 2022 was 10.1 million square feet, which was 18% higher than 2021, yet slightly below the 10-year average.
Office letting deals in the City of London in 2022 totalled 5.2 million square feet which was 23% higher than 2021’s number but 6% lower than the 10-year average.
The total supply of office space in central London in 2022 stood at just over 21 million square feet although 60% of that was second-hand space – a proportion higher than in the third quarter of 2010.