2021 started off with gloomy forecasts for the London commercial property market. According to market analysts, the outlook for the first half of the year was to be dominated by soaring vacancy rates, which were expected to reach a 10-year-high.
In Central London, changes to vacancy and supply rates have certainly been a constant for the past few quarters. In this part of the city, increasing vacancy rates have been mainly driven by the release of large amounts of secondary and Grade B space.
Earlier in the year, vacancy rates in the City were slightly over 10%, but supply was still rising, so they were expected to continue increasing. However, the second quarter arrived with a decline in vacancies, which ended up averaging 8.7% across the City. Despite the improvement, at more than 6.5 million square feet, these are the highest availability rates since mid-2012.
The second quarter of the year also brought some improvement in office take up rates. While these are still significantly below the ten-year average, there was a quarterly increase of over 20% across central London.
However, demand remains rather weak and take up for Central London offices is largely down when compared to 2020 figures. Although demand is weaker, it is still there with an increased focus on quality office space, whether it is new, refitted, or retrofitted to a high standard. The majority of demand so far has come from the public sector, professional services, insurance, and financial services companies.
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