A record 1.3m sq ft of office space across 110 deals achieved a rent of £100 per sq ft or higher in central London in 2022, according to the latest data from CBRE.
The global real estate adviser found that take-up across the whole London market, at 12.3m sq ft, was 28% above 2021, and West End take-up reached 4.9m sq ft, its strongest level since 2000.
The highest demand continued to be for the best-quality buildings offering the highest sustainability credentials.
London’s leasing market was bolstered by high-value deals in the West End, but the flight to quality saw 13 deals outside the West End achieve a rent of more than £100 per sq ft. This was the greatest number of deals to achieve over £100 per sq ft since CBRE’s records began in 1984. Since then, only seven properties outside the West End had ever previously achieved a rent of more than £100 per sq ft.
The West End continued to outperform the other main markets, with data showing Q4 take-up was 1.2m sq ft – 19% above average. This was bolstered by GSK’s leasing of 155,000 sq ft at the Earnshaw, 77-91 New Oxford Street, WC1 (pictured).
Once again, leasing activity in the capital was largely driven by the banking and finance sector, which accounted for 28% of deals in 2022, followed by the professional sector (17%) and the creative industries (17%).
Rob Madden, executive director and head of London investor leasing and occupier brokerage at CBRE UK, said the data reinforces appetite for quality office space in the West End, despite “strong economic headwinds and the general move towards hybrid working”.
He added: “We have seen a number of buildings across the whole London market achieving record rents as occupiers seek the best space to attract their workforce, and, as we head through 2023, we expect demand for the best-quality space to remain robust.”
Despite a slowdown in the final quarter of the year, central London investment volumes reached a total of £11.2bn in 2022 – 12% higher than in 2021 and 40% of which was in the West End.
Ed Bradley, executive director and head of central London office investment properties at CBRE UK, said: “Despite the economic slowdown and 3.25% increase in base rates during 2022, the West End investment market saw £4.5bn of transactions, with Mayfair and St James’s being among the most active sub-markets.
“In H1, record pricing was achieved in high-profile transactions such as 49 Park Lane, W1, which sold for a 2.85 per cent net initial yield to a South American investor that invested in London for the first time. In H2, as the investment market slowed, the core market remained more resilient than other submarkets and trophy buildings continued to transact, such as Fenwick’s premises at 63 Bond Street, W1, to Lazari Investments for more than £420m.”
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