The first quarter has come and gone. It was nothing stellar in terms of lettings but it has given us plenty to be optimistic about: the promise of much more to come. Lettings, at 2.9m sq ft, were down on the Q4 total of 3.6m sq ft, but I prefer to compare like-for-like and the position is good when compared with the figure of 2.65m sq ft that was let in the first quarter of 2013. Having said that, we need only to look back as far as 2010 to see 4m sq ft let in the first quarter, which begs the question: why am I so optimistic about what happened this quarter?
The answer is under-offer space. For six consecutive quarters now we have seen the amount of space placed under offer increase quarter-on-quarter. More significantly, this quarter sees the figure placed under offer match the average level (2.3m sq ft) placed under offer in the eight quarters between 2006 and 2007. That’s important because it was the period before the global economy began its descent.
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The first quarter has come and gone. It was nothing stellar in terms of lettings but it has given us plenty to be optimistic about: the promise of much more to come. Lettings, at 2.9m sq ft, were down on the Q4 total of 3.6m sq ft, but I prefer to compare like-for-like and the position is good when compared with the figure of 2.65m sq ft that was let in the first quarter of 2013. Having said that, we need only to look back as far as 2010 to see 4m sq ft let in the first quarter, which begs the question: why am I so optimistic about what happened this quarter? The answer is under-offer space. For six consecutive quarters now we have seen the amount of space placed under offer increase quarter-on-quarter. More significantly, this quarter sees the figure placed under offer match the average level (2.3m sq ft) placed under offer in the eight quarters between 2006 and 2007. That’s important because it was the period before the global economy began its descent. That could be taken as a bad omen, but against the backdrop of an ever-strengthening economy, with the UK showing the strongest growth forecast of any of the G7 countries in tandem with high levels of demand, it is anything but negative. Further, supply levels in London continue to dwindle, with four of the six markets (City Fringe, Docklands, Midtown, and West End) reporting a drop in their availability rates at the end of . With further pressure on the remaining stock, we should expect to see occupiers with lease events on their horizon making decisions more quickly than they otherwise might as competition for space intensifies. The result should be a strong year of letting that drives rents up. Nonetheless, concerns remain: while space placed under offer increased again, we also saw our fourth consecutive quarter of decline in the level of construction starts. Unless developers act fast, the shortage of good-quality new stock in London will become chronic. Tom Pilkington is EGi’s?head of london office research
