_Central London commercial market: Key occupier trends for 2017

The last 12 months witnessed three key trends gather strength in the Central London commercial property market: the creative sector’s expansion continued apace; there was an intensification of demand from co-working and serviced office providers; and product & pricing once again appeared to be higher up tenants’ priority lists than proximity to competitors.

Headlines in 2016 were dominated by Apple’s pre-let of 500,000 sq ft at Battersea Power Station, which was the largest office letting in London’s West End and Southbank for the last 20 years. However, total take-up from the TMT sector in 2016 was more than 3.0 m sq ft; this suggests growth across the sector and not dominance by a few major players. The recent news that Snapchat is to make the UK its main hub outside the US will help fuel demand in the coming year.

Although take-up by flexible workspace providers failed to match the heights reached in 2015, this sector continues to grow in importance across the market. In excess of 3.0 m sq ft of London’s office space has been absorbed into the sector over the last three years and demand remains strong. As companies seek workspace that can match their dynamic requirements and attract talent, we anticipate strong activity in this sector next year.

In 2015, we identified a significant increase in the number of tenants relocating to different submarkets, and this trend has continued through 2016. Over the last 12 months 66% of occupiers acquiring more than 20,000 sq ft have moved across a submarket boundary; this is very different to ten years ago when we were used to seeing 30%-40% of firms make such a move. This trend underlines that many occupiers now see identifying accommodation that complements their brand identity and can attract & retain workers is more important than maintaining their traditional industry clusters. As a bonus, they are finding that they can find also find value in the areas surrounding the core markets. This trend is certainly here to stay.

Read more in the latest Central London Quarterly Report Q4 2016 here