London’s Midtown market recorded 733,424 sq ft of take-up in the second quarter of this year, according to Farebrother.
The second quarter saw strong results across the market, with United Artists Media Group paying £83 per sq ft at Orion House, 5 Upper St Martin’s Lane, WC2, and ACCA completing a standout transaction for 38,000 sq ft at The Adelphi, WC2, at £75 per sq ft.
A record 22 deals at over £60 per sq ft were transacted in the April-June period, compared with 16 in the first quarter and 31 for the whole of 2014.
Hatton Garden achieved record rent in the second quarter, with Ragged Edge Design paying £65 per sq ft at Lector Court, EC1.
Take-up in Q2 was bolstered by the number of transactions, including DLA Piper’s 150,000 sq ft prelet of 160 Aldersgate Street, EC1.
There were 109 transactions in the quarter, two-thirds of which ranged from 1,000-5,000 sq ft, which Farebrother says is down to smaller occupiers having more confidence and moving forward with expansion plans after the general election.
Demand is most intense at the smaller level, driven largely by occupiers across the DAMIT (design, advertising, marketing and PR, media, internet, technology and telecoms) sector seeking to cluster in the centre of London, namely Midtown’s Farringdon and Clerkenwell.
But there is little sign of Midtown’s supply shortage easing, with an additional 565,000 sq ft currently under offer and most of the market’s 1.27m sq ft development pipeline expected to let during construction.
Take-up in the second half of 2015 will be supported by the launch of two flagship schemes, Wainbridge’s 120 Holborn, EC1, and Rowan’s Aldwych House, WC2.
Investments over the period totalled £332m, about 50% down on last year.
The limited opportunities in the market are underlined by just 11 transactions between April and June, with the majority completed by UK investors.
Jules Hind, partner at Farebrother, said: “What has surprised us is the sheer level of activity, given how constrained supply is, translating directly into strong rental growth across all areas and stock profiles. This is uncharted territory, and underlines the fact that there has been a fundamental shift in the occupational market, with occupiers looking to the centre of London – Midtown and South Bank – ahead of the West End and City.”
Alastair Hilton, head of investment at Farebrother, added: “We have been highlighting the illiquidity in the market for some time, and we are now seeing this being reflected in our statistics. We are 50% down on the previous quarter and 50% down one the corresponding quarter for 2014.
“This, however, is not a paradigm shift in appetite. We know that demand remains fierce for assets, particularly in Midtown and its more peripheral locations, such as Farringdon, where a thriving occupational market is driving exceptional returns.”
