The professional services sector drove office take-up in Central London last year, according to the latest research from Avison Young.
In 2022, professional services firms (including legal, accountancy and management consultancy businesses) acquired 2.5m sq ft of office space in Central London – almost 50% higher than in 2021 and 35% higher than the previous annual high point in 2010.
The financial sector acquired 2.2m sq ft of space over the course of last year – above the sector’s long-term average annual take-up – but leasing activity by TMT and the creative sector fell 45% below the 10-year average.
Avison Young said it anticipates transaction volumes will remain subdued from the TMT and creative sector, but does not expect to see tenants releasing large amounts of office space.
James Walker, principal, London office agency at Avison Young, said: “The expansion of London’s professional sector has been unprecedented. While we have seen a number of high-profile acquisitions from law firms, we are also monitoring accountants and management consultants who are benefiting from the diversification from their traditional roles into areas such as ESG monitoring and IT projects. This demand for top quality space has maintained upward pressure on rents for the best space, and will continue to do so into 2023”.
The prime rental level in the West End core rose to £127.50/sq ft – the highest on record – and in the City the prime rent remained stable at £77.50/sq ft – also a record level for the area.
Avison Young said investment activity was ‘particularly subdued’ as buyers waited for clarity over the economic outlook.
Jamie Olley, principal, Central London investment at Avison Young, said: “Activity in the final quarter of 2022 was particularly low, but this was unsurprising given the wider economic uncertainty. We expect activity to show signs of recovery in the first quarter as price discovery continues; the fundamentals of the London office investment market remain strong and we expect transaction volumes to accelerate rapidly later in the year as investors become more comfortable with the economic outlook.”
