Total quarterly take up rose by 14% driven by a marked improvement in City transaction levels and in addition the Southbank market showed the highest quarterly take up since the start of the credit crunch, the report shows.
Non-core locations such as Clerkenwell, Farringdon and the Eastern City have all experienced strong absorption of office space in 2012 to date, driven largely by the media sector.
In contrast, overall City occupation levels are down half year on half year. The City core saw absorption fall by 138,392 square feet as surplus and ‘grey space’ came back to the market.
Overall Grade A vacancy across central London rose slightly, up by 3%, although with a number of significant deals having agreed heads of terms and regardless of new completions, Q3 should see a return to the downward trend. Grade A vacancy continued to fall in the West End.
Despite falls in overall take up, the West End saw continued pre-letting activity with over 140,000 square feet of deals concluded. The last 12 months has seen 682,000 square feet of pre-let deals in the West End which is more than was concluded in the previous four years.
West End top rents continued to climb reaching £100 per square foot for the first time since the third quarter of 2008.
Soho, Victoria and Paddington are also seeing significant uplift. Regardless, incentive packages remain generous with net effective rents 17 to 20% lower than headline figures across all markets.
‘Market churn and release of grey space is causing availability to experience short term uplift in the City. The release of 363,000 square feet of space at 125 London Wall and 140,000 square feet at Finsbury Dials, the former JPMC occupied units, has contributed half a million square feet to new vacancy,’ said Guy Grantham, director of research and forecasting at Colliers International.
In contrast, the Clerkenwell and Farringdon markets have experienced accelerating falls in vacancy with availability down by 13% quarter on quarter.
‘Net stock absorption in the Northern City submarket has risen to 484,000 square feet in the first six months of 2012 in comparison to total take-up of 532,000 square feet. This points to a lack of churn in the submarket as existing occupiers expand and new entrants absorb space. Demand appears not to be driven by occupiers seeking Grade A product as occupation of Grade B space rose by 290,000 square feet in the first half of 2012,’ added Grantham.
