Annual office take-up activity in central London beat the five-year average by 10% last year, according to the latest data from Cushman & Wakefield. In 2022, 10.47m sq ft of space was leased, with a further 2.76m sq ft under offer.
Banking and finance occupiers were the most active occupiers accounting for 20% of deals, followed by professional services (18%), media and tech (17%) and legal (15%).
In terms of geographic activity, the City led the way with 5.53m sq ft of take-up – 4% up on the five-year average – with the West End up 21% on average, racking up 4.21m sq ft of deals. Prime rents remained stable last year at £120/sq ft in the West End and £72.50/sq ft in the City.
The take-up figures were boosted by a growing number of sub-25,000 sq ft deals, with the volume of deals of this size up 47% year-on-year – the highest percentage of total take-up activity in more than 10 years.
That trend looks set to continue this year with Cushman & Wakefield reporting that of the 296 active requirements in the central London market, totalling 8.5m sq ft, 250 of these requirements are for less than 50,000 sq ft, accounting for circa 4.5m sq ft. Banking and financial sector occupiers lead these requirements (23%), followed by media and tech and professional services (both at 19%).
Ben Cullen, head of UK offices at Cushman & Wakefield, said: “The bifurcation of the London office market is at its most acute since before the GFC. The appetite for the best office space is incredibly fierce, but occupier demands and expectations for their office space are also deepening – location, flexibility, sustainability and wellbeing are rising up the list of priorities and are playing an even bigger role in price negotiations – providing much food for thought for developers and landlords.”
There is currently 25.1m sq ft of supply in the central London office market, including space under offer, with around 15.2m sq ft of space currently under construction – 10.5m sq ft of which is speculative – 54% of this is due to complete this year and 24% will complete in 2024. The vacancy rate of 8.78% remains high compared with the five-year quarterly average.
Andy Tyler, head of London office leasing at Cushman & Wakefield, said: “We saw occupier out performance in 2022 and a glimpse of what could be a new normal for our market. The ways in which trends in workplace dynamics play out despite an economically inflationary backdrop will be key to driving demand and pricing in the future.”
