The second quarter of 2014 has proven to be an active period for the capital’s commercial property market. In fact, the first half of this year has seen some of the highest activity levels and take-up rates since 2010. This has been undoubtedly prompted by increased consumer and business confidence, GDP growth, and a recovering labour market. Below you will find a detailed account of how the London commercial property market has fared during the second quarter of the year.
London office property market: trends and figures for Q2 – 2014
During the second quarter of 2014, nearly 3 million square feet of office space were transacted in London. The vast majority of deals involved office properties in The City and in the West End, whereas a relatively small number of deals involved office space in the Docklands area. Take-up rates were up by nearly 20 per cent on a 5-year quarterly average. Approximately 38 per cent of all deals were carried out by companies in the banking and finance sectors. The professional services industry accounted for 20 per cent of all deals, wheras the TMT sector carried out 16 per cent of all transactions.
In terms of rental values, growth has been clearly evident in nearly every sub-market. Prime rents were almost 12 per cent higher than during Q2 – 2013. In the West End, prime rents currently average £115 per square feet. Areas like Mayfair, St James, and Marylebone command the highest prices in the West End, while Battersea, Fulham, and Camden have the lowest rental values in the area. The cost of office space in The City has risen to £58.5 per square feet, and in the Docklands prime rents are in the region of £36 per square feet. There are more than 500,000 square feet under offer in the Docklands, so it is expected that rental values in this area will continue to rise during the remainder of 2014.
During this quarter, pre-letting deals constituted nearly 60 per cent of all transactions, although in some parts of the capital (such as The City), pre-letting accounted for a higher percentage of the total number of transactions. Some of the most noteworthy transactions involved properties that are still under construction in the West End, such as the office buildings at 1 Fitzroy Place, 10 Brock Street, and 10 New Burlington Street. These are expected to be completed by 2015.