Leasing and investment volumes in Central London’s office market this year have dropped but remain “sustained”, according to new research by JLL.
The findings show that £12.2bn of Central London offices has been traded during the first three quarters of 2018, while £4.3bn of transactions were recorded during Q3.
These year-to-date figures have dropped by 6% on the same period in 2017, a year which saw record investment volumes of £17.7bn.
JLL said there were currently £4bn of assets identified as under offer and a further £4bn of stock on the market.
While this suggests that activity towards the end of the year will remain strong, JLL pointed to a “lack of investment opportunities” compared with the same period of 2017 when £16bn was available.
Office take-up
The data also showed that take-up of offices across Central London reached 8.3m sq ft at the end of Q3 2018, with 3.1m sq ft leased in the West End and 4.5m sq ft in the City.
Active demand remains “well above” the 10-year average, with more than 9m sq ft of enquiries searching for space.
JLL also said that looking towards the transition around Brexit, and especially in the event of no deal, the leasing market could become relatively subdued as occupiers reconsider embarking on any new commitments in the short-term.
However, it anticipated that the impact would be “relatively mild, as most demand is driven by unavoidable lease events rather than expansion”.
Investment volumes ‘to surpass 2017’
Despite the figures, JLL is confident investment volumes will outpace levels seen in 2017. Julian Sandbach, head of central London capital markets at JLL, said: “At the beginning of the year it seemed unlikely that investment volumes would reach similar levels to the bumper numbers we saw in 2017, and now it looks possible that they could even be surpassed.
“Despite the degree of uncertainty around the outcome of Brexit, London continues to attract significant levels of overseas capital that continues to target prime assets.
“As the record levels of foreign capital demonstrate, the majority of international investors feel that while London is subject to some short-term uncertainty, the long-term prospects for London as a global gateway city with a secure investment platform, underpinned by the long-term commitments of occupiers, remain unchanged.”
Daisy Hunt, director of City agency at JLL, added: “Much of today’s demand is structural and driven by lease events. Regardless of Brexit, these occupiers need to move – especially if the space they are in is obsolete and they are under pressure to provide a more modern and agile working environment to attract talent, which is a much larger overhead than property.
“The strong pre-leasing market means that half of the definite pipeline is already leased, ensuring that London is protected against any sector-specific shocks.”
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Leasing and investment volumes fall but remain “sustained”, according to new research by JLL
