London City’s “undersupply” of office availability has increased due to the rising demands for office spaces, with businesses already taking up 6.5 million square feet in capital for this year.
There is both good and bad news, with development activity increasing, but continually outpacing the supply in the short term.
The shortage of office space is not limited to London City, but is London-wide. The City and Docklands have large-scale projects like the Leadenhall Building, the Walkie Talkie and the HSBC Tower. Now the Grade A vacancy rate in these markets is now lower than in the West End, when, traditionally, the space in the West End has been at a premium.
The options for corporates seeking London headquarters are declining. The amount of space available has fallen by an average of 2.3 million square feet per year for the past six years. Availability of new and newly refurbished offices has fallen more than 40% in within the last 12 months.
Now there is just 3.4 million square feet of high-quality office space available. “There are currently around 15 businesses, mostly in tech, media and finance industries, actively searching for more than 100,000 square feet—and there are just six buildings that offer that space,” said Alistair Brown, Senior Director at DTZ. Because of all the supply and demand, he expects, “prime rents in the City and West End to increase by more that 10% this year.”
Brown also believes that the competition for the best quality space will intensify from businesses in London wanting to improve their headquarters. Occupiers have been more active in other submarkets, including King’s Cross and Docklands, with German banking giant, Deutsche Bank, taking 390,000 square feet at Upper Bank Street in Canary Wharf last month.
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