London market gets welcome year-end boost

New requirements for London office space totalling almost 1 million sq ft (92,000 m2) have been launched in the last month by major corporates, according to a new report from Cushman & Wakefield. The new requests provide a further boost to the market which has just enjoyed its best quarter since the collapse of Lehman Brothers over 12 months ago, the adviser said.

The new requirements have helped to push demand for central London office space up to 9.35 m sq ft, an increase of 20% on the market's low point in January when demand stood at 7.8 m sq ft.

In the West End, Centaur Media, Shell and Mace have all launched new requirements for office space of 60,000 sq ft, 220,000 sq ft and 100,000 sq ft respectively. A previously shelved requirement from internet giant Google for 150,000 sq ft has also been reactivated. In the City, 350,000 sq ft of new requirements have been launched including two from AON and Bird & Bird at 200,000 sq ft and 150,000 sq ft respectively.

James Young, head of Cushman & Wakefield’s City office, said: 'The City market has been boosted by some chunky lettings and the supply of truly prime grade A space is falling. Prime schemes that are now coming out of the ground will be coming into a market when demand from occupiers will be rising with a limited supply of new space. Although it’s probably a little too early to talk of speculative development starting again just yet, at some point in the next 12 months we are likely to see some developers starting work on site as funding becomes available and confidence returns.'

In the three months to end September, take up of office space across the capital’s main West End, City & Docklands markets increased by 64% on the second quarter to 1.86 million sq ft. The figure is more than double the take up seen in the first quarter of the year when only 716,000 sq ft of space was acquired by companies, the lowest level on record. Rents have also reached their lowest point in the cycle. Prices on prime space - the benchmark for the market - have now bottomed out at £42.50 per sq ft in the City and £75 per sq ft in the West End. Cushman & Wakefield now expects prime rents to begin to increase during the latter half of 2010. With confidence returning, tenants can also expect to see less generous incentive packages from landlords.

Although increased take up and stable rents mark the beginning of the climb out of the London’s office recession, the supply of office space on the market has increased again with 20 million sq ft now available across Central London, a vacancy rate of 8%.