Jones Lang LaSalle have released their preliminary Q1 Central London Office Market findings.
Damian Corbett, Head of London Capital Markets at Jones Lang LaSalle said: “’Overseas equity continues to have a strong focus on central London. This has been underpinned by significant new requirements in recent weeks from major sovereign wealth funds that have previously not invested in the UK. Supply pipeline remains an issue with little new stock coming to the market and as a result prime yields are likely to remain firm.”
In a market where clear differences distinguish activity across the office investment and agency landscapes, key findings include:
• The TMT sector continues to be the most active occupier group in the market, targeting the West End but also the peripheries around core locations such as Midtown and Southbank, and this sector currently accounts for nearly 20 percent of all requirements across London.
• The once strong Hedge Fund drive in the West End leasing market continues to retract while investment opportunities in and around Mayfair are increasingly looking at the potential for residential conversions on office assets.
• Lease restructures continue to drive occupational activity in the City as the on-going global financial uncertainty forces large occupiers to delay decisions, while the lack of new supply coming to the market is fuelling anticipated pent-up demand when requirements do come forward.
• The West End investment market is saturated with overseas investment requirements against tightening levels of supply, keeping pricing robust with prime yields remaining steady at sub 4 percent.
• The City & Docklands market witnessed strong investment volumes during Q1 with £825 million traded to date and another £1.94 billion currently under offer as investors, particularly Asian capital, target opportunities with long term income prospects.
Neil Prime, Head of Office Agency at Jones Lang LaSalle said: ““On the whole a “wait and see” approach from occupiers has restricted significant levels of activity since the start of the year, with many occupiers restructuring their existing leases where the premises remain fit for purpose. The TMT and media sectors are an exception to this, and have dominated activity in the West End and around Midtown. We expect deal momentum to improve in the second half of the year. At some point this momentum will create a domino effect across London for the best office space, particularly in the City.”
Other key highlights across the Central London Office market in Q1 2012 include:
• Year to date total investment volumes across the Central London office market total £1.3 billion, with 65 percent accounted for by overseas investors.
• Year to date take up volumes in the City total 625,000 sq ft and 552,500 sq ft in the West End, 22 percent and 15 percent down on the same period last year respectively. A further 1 million sq ft remains under offer in the City and 400,000 sq ft in the West End.
• Prime rents in the City are currently £55 per sq ft, while in the West End prime rents are currently at £95.00 per square foot sq ft.