Central London office market stagnates in Q4

Capita Symonds’ Central London Overview reports slower take-up at end of 2011

Article posted: 31 Jan 2012

It was more of the same for the central London office market in the final quarter of 2011 – slowing take-up, fewer investment transactions and increasing availability – according to Capita Symonds’ ‘Central London Overview’ for Q4 2011.

Against the backdrop of a deteriorating financial services market, crisis in the Eurozone and the continued hesitancy of occupiers, take up levels of office space in the City were down, albeit by less than 1%, and availability up 17% on the previous quarter.

There were sharper falls in the take-up of office space in the West End and an increase in availability over Q4 of 12%, but over the year this market has shown itself better equipped to weather economic turbulence given its wider employment base and more solid tenant demand. Although take-up in Central London in 2011 of 8.6m sq ft was below the long run average of 9.7m sq ft, it was still stronger than the recessionary years of 2008 and 2009 and 2001-2003.

With economic growth likely to evaporate in 2012 and financial services employment opportunities showing a substantial month on month decline, traditional leasing markets across central London are likely to be broadly flat in 2012.  However with so many companies postponing relocation and expansion decisions during the last 12 months, a gradual release of pent-up demand could deliver some improvement in 2012 on the disappointingly low levels of take-up seen in 2011.

Investment continues to be dominated by overseas capital with recent statistics showing foreign ownership in the City has grown from only 8% in 1980 to approx 52% in 2011. The rallying of the pound in recent months, turbulence of competitor markets and projected supply gap between 2013 and 2016, supports London’s reputation as a safe haven. 

The volatility of the Eurozone and other international markets without London’s historic financial background coupled with the potential for an ‘Olympic bounce’ should maintain confidence in the London investment market and is already impacting traditional property boundaries with London’s office map changing as more and more businesses seek offices in East London at Stratford and Greenwich as well as emerging hubs such as Farringdon and Kings Cross.

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Posted by Janet