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According to research done by CBRE and Morgan Pryce, the supply of office space in the Central London market is the lowest it has been for just over six and a half years; Fraser Williams a director at Morgan Pryce states that “the supply of office space has been trending downwards since the recession and shows no sign of slowing down at least until the new developments in the pipeline are complete – then we should see the pressure ease off, but this will be in a year and a half to two years’ time.”
In the City, there was a record take up during September of 1.5 million sq. ft. which brought the total take up for the year (up to October) to 6.29 million sq. ft. which is almost 26% higher than the same point last year. The unusually high take up in September was essentially due to 3 deals, Amazon taking a 430,000 sq. ft. pre let at Principal Place and 115,000 sq. ft. at Leadenhall, also M&G taking 322,000 sq. ft. at Fenchurch Avenue. This limited supply and high demand continues to push up rental values for offices in the City which can be seen by comparing average prime rents from Q1 this year (£60.39 psf) with prime rents in Q3 (£65.03).
In comparison, the West End take up for the year (up to October) reached 3.1 million sq. ft. which is 25% ahead of the long term take up for this period. A falling vacancy rate which hit 3.8% in August and a number of pre lettings were driving factors in creating this strong West End performance. Research by Morgan Pryce shows that in the core West End, there have been rental increases between £5-10 psf since the beginning of Q1, with top rents being achieved in Mayfair of £100 psf.
Serviced office providers are also playing an increased role in both these markets as take up in this sector in West End has increased by 62% and by 74% in the City, compared to 2013.
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.