Central London office take-up topped 11m sq ft in 2016 following a 24% increase in activity in the fourth quarter of the year, research from BNP Paribas Real Estate has revealed.
The adviser said it expected take-up to reach similar levels in 2017, with submarkets from Paddington to Stratford to benefit from the imminent arrival of Crossrail, and with occupiers continuing to be drawn to lower occupancy costs in outside of London’s Zone 1.
The agent said it also expected activity among professional services firms to bounce back following a slow 2016.
Commenting on the outlook for 2017, Dan Bayley, head of Central London office agency at BNP Paribas Real Estate, said: “The market saw a burst of activity to end 2016, and we expect this level of activity to endure into the new year. For occupiers, uncertainty is the new certainty, and many are realising there is no point waiting a year or so for the world picture to be clearer, as this is unlikely to be the case.
“We expect 2017 take-up to remain below long term trend, but to be in line with 2016. The biggest deals of 2016 were in Canary Wharf and Battersea, and we expect that the occupiers will continue to be attracted by the lower occupancy costs available outside of Zone 1 this year.
“The imminent arrival of Crossrail, which will be only 12 months away by the end of 2017, will also support activity across the capital, with occupiers focussing on locations like Paddington, Farringdon, Liverpool Street, Canary Wharf and Stratford.”
The largest deal of the year saw BNP Paribas Real Estate advise the Government Property Unit as it leased 500,000 sq ft from Barclays to create a “government hub” in the heart of Canary Wharf, while the capital underscored its status as Europe’s media tech hub with a number of major lettings, including Apple at Battersea.
Dan Bayley said: “There were few big professional sector deals in 2016, but with Hogan Lovells and Freshfields Bruckhaus Deringer in the market, this sector should bounce back this year with some of the bigger deals in the City.
“However, rental growth will be muted at best. We do not expect prime rents to fall, but rents on secondary buildings may suffer. Leases will continue to be more flexible, and those occupiers willing to commit to long leases will be rewarded with more generous incentives.”