A quarter of the way through the year and we are already seeing a significant occupier shift in the core markets.
TMT is back and is taking over the core markets once again, bucking the trend we saw in 2014 of a financial fight back.
We outlined in our London Investor Guide earlier this year how finance had taken over from TMT during 2014 as the ‘darling’ of the core London occupier market, with a year-on-year increase of 41% in the amount of space taken. At the same time TMT dipped by 29%.
That substantial increase meant financial occupiers ruled a quarter of all take-up in London’s core markets, snatching the crown from TMT, which dropped from 31% in 2013 to just 23% last year.
However, so far in 2015 that trend has almost exactly reversed, with TMT again driving occupier demand across London’s core markets; accounting for 29% of all take-up so far, bumping financial occupiers down to 16% – below their 2013 nadir.
This has happened concurrently with financial occupiers increasing their share in fringe take-up to 21% for Q1, continuing along the trend that we have seen over the last 12 months. Perhaps most telling is the fact that compared with Q1 last year, financial take-up in the fringe markets has doubled compared to Q1 2014 – a remarkable statistic when you consider London’s supply is the most constrained it has been for seven years.
Now, the type of space that these two respective sectors are looking for may well be different in many cases, but financial occupiers could be searching for parity in rents as they collectively drift to the outer markets.
Since the start of 2012 TMT occupiers have paid on average 26% less in terms of rent price per sq ft than financial occupiers in the core markets. That gap is reduced to 6% when you switch to the fringe.
It is, of course, only the first batch of stats for this year – we will have more of an indication as to how these trends will develop across 2015, but for the moment the core is swinging noticeably back towards TMT occupation as the flurry of financial deals moves outwards.
graham.shone@estatesgazette.com
