London’s Surge in
Leasing and Investments
Signal a Return to
Normalcy in 2024
London‘s Surge in Leasing and Investments Signal a Return to Normalcy in 2024
In a notable shift toward normalcy, London’s prime commercial property market is demonstrating robust signs of recovery and resilience. The Central London office rental market, especially in Q3, has exhibited encouraging signs, with data from Cushman & Wakefield reporting a 41% uptick in leasing activity compared to Q2. Notably, Grade A spaces have spearheaded this resurgence, contributing to 71% of the total activity. The overall performance in Q3 surpassed the five-year quarterly average by 14%, highlighting a trajectory toward a post-Covid ‘normal.’
This data reports substantial increase in the volume of office space under offer, marking a 22% surge above the five-year quarterly average. Cushman & Wakefield’s data suggests that this trend is poised to continue, with an estimated 60% of the under-offer space anticipated to close by year-end, projecting an annual take-up of around 8.5 million sq ft, aligning with the figures from 2021.
London’s City, in particular, has emerged as a powerhouse, claiming 64% of overall take-up in Q3, amounting to 1.64 million sq ft. This strong performance underscores the city’s resilience and attractiveness to occupiers, defying the broader challenges faced by the commercial property market.
Confidence in London’s market is further exemplified by British Land’s strategic decision to take back an 8 story building near Regents Park once Meta broke its lease. This is despite Meta offering an alternative tenant to take the building, British Land opted to reclaim the space, citing a significant rise in office rents since the original agreement in 2021. British Land has said it expects that rents will grow at the top end of its previously guided range in 2024 across its portfolio. This move underscores the landlord’s confidence in securing higher rents amid the evolving market dynamics.
Moreover, the influx of Asian capital into London’s prime commercial property market serves as a testament to the city’s enduring appeal. High-quality office buildings with strong sustainability credentials have become focal points for Asian investors, reflecting a flight to quality. Despite the challenging macroeconomic environment, London’s resilience and efficient repricing in the property market are attracting strategic investments from Asia.
The ongoing surge in London office development, with a record 5.1 million sq ft of new construction starts, further substantiates the city’s rebound. Deloitte’s London Office Crane Survey reveals a robust development pipeline, including an extraordinary surge in refurbishment starts. With 34 schemes covering 3.3 million sq ft, refurbishments are being propelled by the anticipated tightening of Minimum Energy Efficiency Standard (MEES) regulations, aligning with tenants’ sustainability commitments. This surge in refurbishment activity is indicative of developers’ confidence in meeting environmental standards and fulfilling the growing demand for premium, sustainable office spaces in the capital.
London’s commercial property investment market is on a trajectory to reclaim a sense of normalcy, fueled by a resurgence in leasing activity, strategic decisions by major landlords, an influx of Asian capital, and a robust development pipeline. The signs of recovery are bolstered by confidence in premium office spaces and the city’s enduring attractiveness to global investors.
Published: November 23 2023
Author: Byron Baciocchi