Brexit fears yet to hit City occupier market

10th June 2016

Fears over a possible Brexit have yet to dampen the City occupier market, with take-up rising 31% in the first quarter of the year following a drop in activity at the end of 2015, according to Gerald Eve research.

Financial services companies, including traditional investment banks, wealth and asset management firms and peer-to-peer lenders were the main drivers of lettings activity in the first quarter, accounting for 37% of take-up, the research showed.

Technology, media & telecoms (19%) and other corporate companies (12%) were the next most active sectors, followed by serviced office providers, which remain key players in the city market, accounting for 11% of take-up.

In total, 1.69m sq ft, across 244 floors, was taken up in the first quarter of 2016, an increase of 31% on Q4 2015 and 4% year on year.

Within the City market, the EC2 postcode was the main driver, accounting for 47% of all take-up.

Gerald Eve said there were no real signs of the impact of uncertainty ahead of the EU referendum on the occupational market, although the deals completed in Q1 were likely to have been finalised several months prior and before the referendum date was set.

Continued strong demand saw prime rents increase for the sixth consecutive quarter from £68/sq ft to £70/sq ft.

Several deals were agreed at or above the £70/sq ft mark, including Quadrature Capital taking 10,672 sq ft at 122 Leadenhall Street and Proskauer Rose’s letting of 5,012 sq ft at 110 Bishopsgate for £72.50/sq ft.

“Demand levels remain relatively consistent and continue to put upward pressure on rents,” said Fergus Jagger, partner at Gerald Eve.

“While there are downside risks on the horizon, not least the uncertainty surrounding the EU referendum, we expect demand for the year to finish broadly in line with 2015.”

In terms of supply, volumes rose 18% on the quarter to 2.66m sq ft, but were still down 10% on the year.

The rise was due to about 500,000 sq ft of new development coming to the market, with the amount of unrefurbished stock only seeing a marginal increase.

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