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A report conducted by the property consultants, Cushman and Wakefield, has predicted that the demand for offices in Central London will increase over the coming years as we see– and indeed have already seen – an increase in demand arising from the Telecoms, Media and Technology (TMT) sector as well as the insurance sector, which has already taken up around 7.8 million square feet in 2012. These sectors are now key drivers in the demand for office space, and have proven to be resilient against the current economic situation. In this report it has also been pointed out that we can expect to see continued activity in the market due to the number of leases which will be expiring in 2015. When the occupiers subject to these leases seek to relocate or renegotiate, demand will be pushed up further.
Looking at 2012, we can see that there has been a shift in occupation across the capital away from the West End. Offices in Mayfair, in particular, have seen a decrease in occupation of around 25%, while the City and Docklands areas have experienced an increase in occupation of around 10% compared to 2011 figures. These figures probably reflect the latest occupation boom from the insurance sector, particularly in pre-lets. Eugene O’Sullivan of Morgan Pryce, comments, “although the TMT sector may have traditionally veered towards areas such as Soho, there is in fact in this area a lack of supply of suitable office space.
Cushman & Wakefield’s report has noted that the increase of occupation from the insurance sector within the City is represented largely in the form of pre-lets while there is a further 300,000 square feet which is under offer. We have seen quite a few developments coming to the end of their completion within the City – for example, The Shard, the ‘Cheesegrater’ and the ‘Walkie Talkie’. These new developments are sought after by the insurance industry, being in close proximity to Lloyds of London. In contrast, there are no opportunities to develop any more large office buildings in Mayfair, and consequently no opportunities for such pre-lets there.
The demand for office space we have seen during 2012 – a demand which has increased from 7.5 million square feet at the beginning of the year to 8.7 million square feet at the end – has been from the TMT sector, accounting for 35%, while the financial sector has dropped in its demand to around 19%, and the demand from banks has drastically fallen; they are only accounting for around 2% of enquiries in the market at the moment. We can safely say that the TMT market is continuing to head the demand, and has helped to counteract the current financial crisis.
Morgan Pryce is a specialist tenant acquisition agent with offices in Oxford Circus and the City. Morgan Pryce specialises in search, negotiation and project management and works exclusively for tenants.