Home Commercial Property London office market space 2018: Three things you need to know

London office market space 2018: Three things you need to know

by Sponsored Content
9th Mar 18 9:59 am

Take a look 

According to the latest West End Office Market Watch from Savills, take-up in January 2018 reached 243,902 sq ft (22,658 sq m) with a further 189,917 sq ft (17,643 sq m) of office space going under offer in the same month. Activity takes the total amount of space under offer in the market to 980,976 sq ft (91,133 sq m) – 63 per cent up on the long-term average.

Tech and media occupiers were the busiest at the start of the year, according to Savills, accounting for 56 per cent of the space taken by the end of January. They were followed by the serviced office sector at 18% and insurance and financial services at 10 per cent. 

The international real estate advisor suggests the West End office market will be shaped by three indicators in 2018: a knock-on effect of serviced office providers; availability of ‘grey space’; and the commitment to new office development.  

Serviced offices – the knock on effect of their arrival in the West End

In 2017 activity by serviced office providers accounted for 19 per cent of total take-up in the West End and Savills says their arrival is expected to impact the number of sub 5,000 sq ft lettings recorded this year as occupiers at the smaller end of the market opt instead to commit to desks within serviced offices. The firm says 2018 will be a year for landlords to really consider how best to deliver space to the market, whether to compete with serviced offices or to create a hybrid flexible solution. 

‘Grey space’

Another force set to shape the market, says Savills, is an increase in the volume of ‘grey space’ coming to the market – space that may be available for sub-letting from existing tenants. Yet the firm points out the current level of demand, against a vacancy rate of 4 per cent (below the long term average of 4.5 per cent), is seeing much of this space quickly re-let.

New development?

According to Savills, of the 1.4 million sq ft of newly developed and refurbished office space set to be delivered in the West End in the second half of 2018, 964,617 sq ft, (67%) is already pre-let. This goes to show the extent to which occupiers are making their real estate decisions further and further into the future. For some this has always been true, particularly for the larger, corporate occupiers, says Savills, but the market is seeing evermore smaller firms also thinking ahead in terms of leasing commitments. 

Hunter Booth, director and co-head of Savills West End office agency team, says: “With serviced office providers having expanded quickly and looking to fill their offices over the course of the coming year this is likely to impact landlords in the small suite segment of the West End market, which tends to be concentrated around Mayfair and St James and traditionally appeals to the same type of occupier. However, it does force landlords of all size bands to evaluate how they deliver space to the market and how accessible they make this space to occupiers.

“Speculation over ‘grey space’ could also impact market fundamentals but the balance of supply and demand that currently prevails in the West End has absorbed this extra space to date. A high level of pre-letting reduces the impact of near-term speculative deliveries and keeps supply levels low. Yet while we need to continue operating with caution, there is a strong argument for the delivery of more speculative developments to commence in 2018 that can provide the type of accommodation today’s occupiers have come to expect.” 

Leave a Comment