- Focus on best quality workplaces intensifies with Grade A recording its highest quarterly proportion since Q3 2018
- Overall take up reached 1.92 million sq ft, 2% below the five year quarterly average
Central London office occupiers’ focus on the best quality workplaces intensified in Q1 2023 with Grade A space accounting for two-thirds of leasing activity – the highest quarterly proportion since Q3 2018, according to global real estate services firm Cushman & Wakefield.
In total Q1 take up reached 1.92 million sq ft – of which 1.27 million sq ft (66%) was Grade A – which was 2% below the five-year quarterly average. The 12-month rolling take-up figure remains above 10 million sq ft, and is ahead of the five-year rolling annual average of 9.6 million sq ft. A further 3.18 million sq ft was under offer at the end of March which is 6% above the five-year quarterly average.
Overall, there were 127 leasing transactions in Q1, more than half of which, 69, took place in March. Of these, 113 were sub-25,000 sq ft and four were over 100,000 sq ft. Eleven deals were pre-let acquisitions, with TikTok’s 139,000 sq ft deal in Clerkenwell and Pimco’s 106,000 sq ft transaction in Marylebone the largest. Geographically, the City market accounted for 57% of the overall take up, with more than a million sq ft, while the West End’s 688,344 sq ft represented 36%, with the remainder in East London.
The Banking & Finance sector continues to hold significant importance for Central London. Over 400,000 sq ft of take-up was recorded in Q1 – including the deal by Pimco – equating to a 21% share, which is broadly in line with historic trends. Professional Services was the second largest sector with a 17% share, followed by Media which – driven by the large TikTok deal – increased its quarterly share to 15%, more than double its five-year quarterly average.
Following the dominance of Legal occupiers across 2022, sector activity was noticeably reduced in Q1 with just 37,000 sq ft completed across four transactions equating to around 2% of take up. However, this Legal sector has more than 500,000 sq ft under offer which is likely to increase its proportion across the year.
SupplyDuring Q1, close to 1.16 million sq ft of new developments completed across the market across seven schemes, of which 37% was pre-let. The completions included five schemes over 100,000 sq ft.
Heena Gadhavi, from Cushman & Wakefield’s UK Office Insight team, said: “The macroeconomic outlook remains cautious and occupiers and landlords are continuing to contend with elevated costs, as a result of sustained inflation, and structural increases to debt servicing costs. While this outlook will undoubtedly impact the leasing market, activity for the first quarter held up well and is in line with the post-pandemic new normal.”