A flurry of major office lettings in the last three months boosted London’s office market to 6.4 million sq ft (594,000 m2) in 2009, according to new figures from Cushman & Wakefield. Some 41% of the year’s total take-up of office space took place in the last quarter as corporates moved to secure deals believing rents to have bottomed out. The take-up of 2.6 million sq ft is the highest quarterly figure since the collapse of Lehman Brothers in September 2008.
A flurry of major office lettings in the last three months boosted London’s office market to 6.4 million sq ft (594,000 m2) in 2009, according to new figures from Cushman & Wakefield. Some 41% of the year’s total take-up of office space took place in the last quarter as corporates moved to secure deals believing rents to have bottomed out. The take-up of 2.6 million sq ft is the highest quarterly figure since the collapse of Lehman Brothers in September 2008.
Rents stabilised at their lowest point in the cycle in Q4 with prices on prime space - the benchmark for the market - standing at £75.00 (EUR 83.00) per sq ft in the West End. In the City market the first rental growth in three years was recorded with prime rents rising 3.5% to £44.00 per sq ft, up from £42.50 per sq ft.
Key deals which happened at year end included law firms Clyde & Co taking 145,000 sq ft at St Botolphs, EC3, and Pinsent Masons taking 189,000 sq ft at Crown Place, EC2. A number of other large transactions failed to make the year-end cut-off meaning there should be a reasonable start to 2010.
Central London available space currently stands at 20 million sq ft which equates to an overall vacancy rate of 8.5%. Market dynamics, however, are fundamentally more solid today than in the last recession, when the peak vacancy rate was approaching 17%; in part due to a much smaller speculative construction pipeline today but also because occupiers have been less inclined to release surplus space back onto the market compared to the early 1990s.
James Young, head of C&W’s City office, said: "Undoubtedly 2009 was a challenging year for the office markets in London. We turned the corner in the third quarter, however, as take-up of space started to increase and in the fourth quarter we have seen a number of major transactions that have boosted the annual take-up to a respectable level. With rents on prime City space now showing growth, 2010 will be a time for occupiers to secure terms for their future business before the onset of a shortage of new space drives terms further in landlords' favour.'
Guy Taylor, head of West End office agency, said: '2010 will see a supply-led recovery although demand for West End office space is also up by 50% since January. Professional and TMT corporates are likely to take up the most and for the best space, either planned or now coming out of the ground, we are likely to see a number of pre-let agreements with landlords.'