News

Google deal masks cracks in London office take-up

News

Tom Pilkington

13 April 2013

Offices

Q1 13 offices graph 570p

However, the figure is thanks to the 860,000 sq ft Google deal at King’s Cross Central, which glosses over some significant cracks in the market.

The total take-up figure for Q1 2013, according to EGi’s data, is 2.65m sq ft – an increase of 700,000 sq ft on the same period last year, and an increase of almost 300,000 sq ft on Q4 2012.

Deduct that freakishly large Google deal and the figure is actually down 160,000 sq ft on the same period last year, and not even the most optimistic among us could consider Q1 2012 to be a great quarter.

While it would be foolish to ignore the significance of the search engine giant making such a bold statement in the capital, it would be similarly foolish to ignore what it hides.

The most notable drop in take-up occurs in the West End, where only 560,000 sq ft of space was disposed of – 220,000 sq ft down on this time last year.

Further, it is the fourth-lowest quarterly total in this market in the past three years and can be attributed to the chronic lack of available space (the availability rate is around 5.5%), and a lack of willingness on the part of businesses to take the plunge on the high-priced stock that is available.

In some respects, the City core fares even worse than the West End. Take-up might be higher than the West End by 85,000 sq ft, but this was the City core’s third-lowest quarterly figure in the past three years.

For the second successive quarter, there was a reliance on the insurance industry, where Royal Sun Alliance and Liberty took sizeable chunks of space in 20 Fenchurch Street, EC3. Again, take these away, and such is the dearth of large deals in the market at present that the picture looks bleak.

So, what are the positives? EGi data points towards a 12% year-on-year increase in the amount of space under offer, so while take-up is down on what we might expect, there is hope that there is business in the pipeline to be done.

It will all come down to how confident those businesses are feeling.

Lies, damned lies, and statistics. This is the best way to sum up a first quarter in the London office market that, when considering a headline take-up figure that is the highest since Q4 2011, looks reasonably rosy. However, the figure is thanks to the 860,000 sq ft Google deal at King’s Cross Central, which glosses over some significant cracks in the market. The total take-up figure for Q1 2013, according to EGi’s data, is 2.65m sq ft – an increase of 700,000 sq ft on the same period last year, and an increase of almost 300,000 sq ft on Q4 2012. Deduct that freakishly large Google deal and the figure is actually down 160,000 sq ft on the same period last year, and not even the most optimistic among us could consider Q1 2012 to be a great quarter. While it would be foolish to ignore the significance of the search engine giant making such a bold statement in the capital, it would be similarly foolish to ignore what it hides. The most notable drop in take-up occurs in the West End, where only 560,000 sq ft of space was disposed of – 220,000 sq ft down on this time last year. Further, it is the fourth-lowest quarterly total in this market in the past three years and can be attributed to the chronic lack of available space (the availability rate is around 5.5%), and a lack of willingness on the part of businesses to take the plunge on the high-priced stock that is available. In some respects, the City core fares even worse than the West End. Take-up might be higher than the West End by 85,000 sq ft, but this was the City core’s third-lowest quarterly figure in the past three years. For the second successive quarter, there was a reliance on the insurance industry, where Royal Sun Alliance and Liberty took sizeable chunks of space in 20 Fenchurch Street, EC3. Again, take these away, and such is the dearth of large deals in the market at present that the picture looks bleak. So, what are the positives? EGi data points towards a 12% year-on-year increase in the amount of space under offer, so while take-up is down on what we might expect, there is hope that there is business in the pipeline to be done. It will all come down to how confident those businesses are feeling.