- Take-up for Grade A office space 7% ahead of the five-year H1 average during the first half of 2023, reaching 2.44 million sq ft
- West End recorded its highest Grade A proportion of take-up on record, at 78% of total H1 leasing
- Significant volume of office space under offer at end of Q2 – 19% above 5-year quarterly average – partially offsetting lower overall take-up levels
London, 1 August 2023 –Take-up of Grade A office space in Central London reached 2.44 million sq ft during the first half of 2023 as occupiers continue their focus on the best buildings and locations, according to latest figures from Cushman & Wakefield. Whilst overall H1 volumes have reduced, both on H1 2022 by 28% and the five-year H1 average by 9%, Grade A volumes have increased, recording a 2% increase compared with this time last year and increasing by 7% on the five-year H1 average.
Total take up reached 3.74 million sq ft in H1 2023, spanning 246 deals. Whilst the City market took the largest share of H1 leasing volumes, in the West End, grade A volumes accounted for 78% of its total take, the highest proportion on record in this submarket.
The smaller end of the market remains active, with deals below 25,000 sq ft taking a 54% market share in Q2 2023, increasing to 60% during H1 – ahead of proportions seen prior to the pandemic and a continuation of trends noted during 2022.
Appetite for space remains, with 3.55 million sq ft under offer across the market at the end of June 2023, 19% above the five-year quarterly average, and a 12% increase from the end of Q1 2023. Of the space under offer, 74% is for Grade A offices reinforcing the ever-growing appetite for high-quality space across the market.
Approximately 5.41 million sq ft of space is currently under construction and is due for delivery in the second half of 2023, of which 29% is already pre-let.
Heena Gadhavi, from Cushman & Wakefield’s UK Research & Insight team, said: “The Central London occupational market has held up despite a cautious macroeconomic outlook, and the best quality schemes continue to lease well. Although overall leasing activity is down, businesses are more aware than ever of the importance of attracting the right talent with high-quality and well-located spaces. This is reflected across Central London, and no more so than in the record-breaking proportions of Grade A take-up in the West End. “The flight to quality has been talked about for a while but is now unequivocally borne out by the data, signifying a clear shift in occupier demand. In turn, this is creating a three-tier market between premium assets, where rental values are accelerating at pace, versus prime supply, and the rest of the market.”
The banking & finance sector continues to be the biggest source of demand, accounting for 21% of total leasing volumes in Q2. Professional services were also active during the quarter, accounting for 14%, while the legal and insurance sectors were bolstered by law firm Goodwin Proctor’s 89,449 sq ft new lease in Sancroft, EC1 – the largest deal of the quarter.
Other key deals from Q2 2023 include Chanel pre-letting 86,000 sq ft at Berger House on Berkeley Square for its global headquarters, and Pension Insurance Corporation (PIC)’s pre-let of just shy of 67,000 sq ft at 22 Ropemaker in the City.
In the investment market, £8.5 billion has traded across the market in the 12 months to the end of Q2 2023, and as with the leasing market, acquisitions in the West End made up a large portion of activity during the quarter.
Gadhavi added: “As we look towards the second half of 2023, we expect to see a continuation of activity at the smaller end of the market, as well as demand for assets that provide value add opportunities – both for occupiers and investors – and, overall, a gradual increase in transaction volumes as investors gain greater confidence over pricing levels in the market.”
