Take up

Take-up reached 2.88 m sq ft in Q1 2019, down 28% on the quarter and 11% below the long-term average. It should be noted that levels of take-up are historically low in Q1, so take-up levels in Q1 19 were in fact just 4% below the Q1 long-term average. There were two transactions over 100,000 sq ft, compared to a long-term quarterly average of three.

The TMT sector accounted for a quarter of take-up in Q1 2019, followed by flexible offices with 20%. Flexible offices now account for 12.8 m sq ft of space across the capital, which equates to 5.6% of London’s office stock. The continued growth in flexible office space is a sign of London’s dynamism and the vitality of the creative economy, but it is having an effect on the traditional sub-5,000 sq ft market. Take-up of units under 5,000 sq ft have been below average since Q1 2015, coinciding with when flexible office take-up started to soar.

Demand

Named active demand totalled 10.09 m sq ft at the end of Q1 2019, which although 5% down on the previous quarter, is still 21% ahead of the long-term quarterly average. The financial sector is now the most active in our demand profile, accounting for 62%, followed by professional at 19%. Interestingly, tech requirements are currently 52% above average, while media requirements are down 60% on average.

Supply

Supply levels across London reduced marginally by 1% over the quarter to 13.98 m sq ft, with levels now 13% below the long-term average. This equates to a vacancy rate of 6.1%, compared to a long-term average of 7.1%. Availability in the City is particularly tight, with levels currently 27% below the long-term average. In addition, the level of new and refurbished space available across London is currently 25% below the long-term average.

A total of 930,000 sq ft across seven schemes completed in Q1 2019, down 6% on the long-term average but 7% ahead of the same quarter last year. There is currently 13.14 m sq ft under construction across London, but 50% of this has already secured a pre-let, highlighting the depth of underlying demand. There is 4.26 m sq ft under construction and due to complete this year, of which only 1.51 m sq ft has not secured a tenant and is available speculatively.