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If the word on the property-market street is to be believed, 2014 is set to look good for investors in the UK capital, continuing a trend that just got stronger during 2013.
While 2012 economically was still suffering somewhat from the effects of the worldwide financial crisis, last year saw London go from strength to strength, with new areas rising in popularity and with incoming international investment helping to boost both take-up and rental prices.
Like last year, 2014 may encounter issues of lack of supply, one of the continuing after-effects of the post-2008 construction projects having been put on hold due to caution and restricting financing. Until more space becomes available, demand may push prices higher thus encouraging tenants to other, cheaper (but less so than in the past) areas of the capital.
Figures recently provided by Cushman & Wakefield indicate that take-up is currently almost doubling year on year – something that couldn’t have been predicted two years ago. The figures also show that transaction volumes are up – 22% over the five-year average, with large-scale deals as opposed to quantity of transactions playing a large part in these volumes.
A now-recognisable pattern in the commercial property world is the sectors that are driving take-up. Once driven by the financial sector, the insurance sector is expanding into new premises, but not before the TMT sector has made its mark. The recent figures state that TMT companies account for 36% of last year’s letting volumes, up nearly a quarter over the previous two years. Analysts also suspect that as the economy improves, the banking sector may also start to tentatively increase its position in terms of lettings and re-establish itself as the large-scale City tenant sector.
The City achieved almost two million square feet of space by the end of 2013, the last quarter of the year bettering all others since the middle of 2007. Added to the volumes for the rest of the year, the City’s let space rose to 6.5 million square feet. Also showing its best figures since 2007 is the West End office market, increasing by over 50% last year, and amounting to 3.75 million square feet.
As construction gets back on track, investors are reporting more pre-let agreements. Whereas 2012 and early 2013 saw newly constructed buildings struggle to attract tenants, whether pre-let or post-completion, increasingly the new, purpose-built space is proving popular, adding to the wide range of buildings available to tenants in the capital. More than ten pre-lets of over 50,000 square feet were agreed last year, more than the previous three years put together.
These figures will only indicate that the investors’ view of London as a ‘safe bet’ over recent years has been borne out and the London office market sector will be hoping for another good year.
This news was brought to you by Morgan Pryce, 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.