Despite Brexit, office take-up in London is the strongest in six years. What’s behind it?
2019 was the year that most experts predicted doom-and-gloom for the commercial property market. With the EU departure date originally set for March, many people expected to see uncertainty from investors and businesses alike, which in turn, would negatively impact office take-up.
However, the latest statistics prove that the opposite has happened. So far, 2019 has seen the strongest take-up of office space in six years. Let’s examine the situation further.
Continued demand for office space
According to reports, the first-quarter of 2019 was the highest performing in six years for the office sector. In the West End alone, 42 transactions were completed in March, which took the total to 98 office lettings in total since the start of the year.
In the City of London, the trend was the same, with 100 deals on the table, and 33 completed in March.
Media and tech companies were driving the demand in the West End, with a share of 25% of all the area’s take-up. In the City, the lion’s share was divided between the serviced office provider sector, and insurance and financial services.
What’s driving it?
There are a number of factors behind the surge.
- Businesses are aware that, in order to impress, they need to be located in desirable areas. As such, competition for West End and City offices is fierce.
- Limited supply. There’s also an awareness of the limited number of offices available on the market, both to buy and lease. Due to this fact, when premises come to market, they’re usually snapped up quickly. Pre-lets are becoming increasingly popular too, with 70% of the West End’s upcoming developments already let out to businesses.
- Growing economy. Again, flying in the face of predictions is the news that the UK’s economy has enjoyed modest growth in recent months. Additionally, employment is up, to a record high of 32.72 million people in the three months to February 2019. More people in employment means a larger workforce, which in turn, means that growing businesses require more office space.
- The sectors dominating the commercial office market are currently enjoying good success. For example, the tech sector is benefitting from the continued rise of the online retail industry, which has resulted in a boost to sales. This provides companies with the finances to relocate businesses to a prime London location.
One industry expert comments: “Of the deals signed in the first quarter, 45 percent have been for 10 years or more, which is further evidence of the ongoing resilience of the market, despite Brexit uncertainty being delayed further.
What’s in store in the future?
It’s unlikely that demand will dip any time soon. In addition to start-up ventures, there are a number of companies that want to expand into the capital, and leasing or purchasing office space is the only way to achieve this.
Certainly, there’s still an atmosphere of caution and uncertainty among investors and businesses; but the need to obtain premises in key London locations seems to be the overriding priority at present.