Two weeks ago we published our end-of-year London Offices Market Analysis, and what a year it was. Take-up increased year-on-year by 59%, and the investment market exceeded even the most wildly optimistic predictions.
An economy and an employment market moving in the right direction in a manner that is forecast to continue (with a few bumps along the way) is giving rise to a feeling that 2014 will pick up where 2013 left off. Readers will remember the false dawn of 2010 when take-up hit 14m sq ft in a year where demand was driven by lease events rather than growth, only to result in take-up dropping back to 9.6m sq ft in 2011.
But 2013 was different – take-up was driven by businesses growing, hence the positive sentiment for 2014. Take-up in 2013 was also driven by the City core, which accounted for 35% of lettings.
While 2010 may have signalled a false dawn for the London office market, it also marked an important point in time for the City core market. It was the year in which the TMT sector decided that the City was a viable location.
Between 2003 and 2009, the TMT sector accounted for 6.1% of the City core’s take-up on average. Since 2010, parts of the sector have scrapped their requirements of brick walls and high ceilings, and dashed for the glass-clad behemoths of the City, bumping the sector’s share of City core take-up to an average of 15.5% of total take-up each year from 2010 to 2013.
While TMT is not as significant as the financial sector in the City core, at the past two spikes in the market (2010 and 2013), it has accounted for more of the take-up than the City mainstays of the insurance and professional services sectors.
As synergies between finance and ?TMT grow ever stronger with the emergence of the “fin-tech” industry, the scope for the role of TMT in the City is bigger than ever – but then we must consider the dilemma of whether the “tech” is now just a part of the “fin” and should be considered and accounted for as such.
Tom Pilkington is head of London offices research EGi
