London office prelets hit 12-year low

Central London office prelets accounted for the lowest proportion of total take-up in over a decade last year, according to data from Cushman & Wakefield. The agency found 24% of take-up in 2023 was attributed to prelets, compared with the typical take-up which has stood at 25-30% between 2013 and 2022. Almost two-thirds of 100,000 sq ft-plus deals – five out of eight – were prelets. Those five transactions marked the lowest volume for 12 years outside of 2020, when there were three. The eight largest deals totalled 1.6m sq ft, and included HSBC’s prelet of Panorama St Paul’s, EC1, the largest deal of the year. In November, the bank signed a deal to take 556,000 sq ft in the building, more than halving the space it had at its former headquarters 8 Canada Square, E14. For the first time in 15 years, no off-plan prelets were recorded, as occupier markets continue to feel the aftershocks of months of wider economic distress and ongoing political uncertainty. “Off-plan prelets have always been a rarer beast but will return,” said Andy Tyler, head of London office leasing at Cushman. “Their current absence reflects a combination of current economic uncertainty coupled with an increased focus from occupiers in minimising conditionality.” Occupiers’ reluctance to commit to off-plan prelets hinges on their increasing desire to de-risk leasing deals and prioritise certainty on project completion and comfort on anticipated timelines, Tyler said. This has moved up the occupier wish list to mitigate unexpected timeline changes during an office move and reduce any associated cost that would follow. Over the year, 2.22m sq ft of office space was prelet in central London across 37 transactions, with an average deal size of 60,000 sq ft. This was down from 2.97m sq ft prelets across off-plan and under construction deals in 2022. The pull of a West End postcode continued to attract more prelet occupiers than the City, with 21 deals and 16 deals closing respectively. Yet the average deal size of 83,869 sq ft in City more than doubled the West End average and led to 1.3m sq ft of prelets across the wider City market compared with 882,000 sq ft in the West End. The year saw a shake-up in the most active sectors for lettings. Legal lost its position as the most dominant sector in prelet deals. Despite holding the top spot since 2020, it was pipped to the post by the banking and finance sector, which became the most active in square footage occupied and number of prelets at 1.06m sq ft and 14 deals respectively. In total, the sector accounted for almost half of all prelets, followed by the legal, insurance and tech sectors. To send feedback, e-mail chante.bohitige@eg.co.uk or tweet @bohitige or @EGPropertyNews Image © Manuel Romano/NurPhoto/Shutterstock