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Investment within the commercial sector has picked up since last year, as noted in a recent report by Knight Frank. Offices in Central London have seen the strongest investment over 2012, the best year since 2007, this improvement being a result of a sudden increase in the number of purchases by foreign investors.
The total investment in offices in Central London was £13.8 billion last year, which increased from £9.6 billion in 2011, and even more so from the ten-year average of £10.8 billion. Of the total 2012 investment, £9.6 billion was attributed to foreign buyers, equating to 70% of the total investment in the Central London commercial market and the highest figure to date in respect of investment by this group of purchasers. It’s been a relatively quick turnaround: in 2000, foreign investment only accounted for 24% of the total. 2012 is the fifth year in a row that has seen overseas buyers lead the investment market and account for the majority of purchases.
The leasing market has, for the last few years and until now, seen an overall decrease in the take-up of office space. The vacancy rate is now improving, albeit in small steps; last year there was a vacancy rate of 7.2% in comparison to 7.3% at the end of 2011. West End vacancy rates have been lower than the average during 2012, the average rate being 5.6%. The City’s vacancy rate is 8.4%, which is higher than the average but doing better than the previous year of 8.9%. The City has recently benefited from the influx from the TMT (Technology, Media and Telecoms) sector – there has been a take-up increase here from 5.5 million square feet in 2011 to 5.8 million square feet in 2012. Of this, 1.2 million square feet were taken up by the TMT sector.
Eugene O’Sullivan, Director at Morgan Pryce, notes, “The increase of investment as well as the influx from the TMT sector will see a positive move in the market. We should see new creative spaces being developed to suit the needs of the TMT sector in the coming years.”
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.