With total office take up over 7 million square feet in the City in 2015, the serviced office sector has lead the way with over 10% of the total according to the latest report from Savills, published at the end of the year.
With 2015 completing a three year period of office growth across the City it was the serviced office operators that set the biggest record. They accounted for more than 1.9m sq ft of the total office space over 2014 and 2015 which compares to a total of around 1.5m sq ft between 2005 and 2013.
Office take up was dominated by four strong sectors. Professional services accounted for 19% of the total space taken followed by Insurance and Financial services at around 17% and the TMT sector at 12%. One of the surprising changes has been the 9% take up by the Banking sector after a few years of low performance.
Of the planned office space scheduled to open in 2016 more than half (54%) is within the area known as the City Core, which covers EC2, EC3 and half of all the EC4 postcodes in the City of London. With Carter Jonas predicting further growth in commercial property investments in Central London of 8.8% in 2016 this anticipated new space may not be around for very long, especially as 2015 ended with healthy occupancy levels in London of almost 96% (Savills December 2015).
With the latest plans submitted in December for what will be the City of London’s tallest tower, the Undershaft due to open in 2019, it’s important to note that a total of 5.2m sq ft of new and refurbished space will open in 2016 which is set to fall short of the expected demand.
The scramble for take-up of the expected space is set to mirror 2015 and continue the growth seen since 2013 and will see occupancy rates return to pre-recession levels. The serviced office sector in particular, will continue to experience the increases seen in 2015 helping to cement the sectors growth back to pre down-turn levels last seen prior to 2008. And this strong growth will continue to be driven by the Central London market with growth over 10% in 2015 set to continue. Southwark led the way in 2015 at 17% whilst the Greater London area saw significant growth of around 30% last year.
Outside of the strong London market, Manchester saw the serviced office market grow by 9% with workstation rates across the city rising by some 5% year on year. Interestingly Bristol and Cambridge made up the trio with Manchester to lead the growth in England with Aberdeen, Glasgow and Edinburgh in Scotland and even Belfast showing significant increases in both the number of new serviced office centres and workstation rate increases compared to previous years.
Lee Grodent, the managing director of one of the UK’s leading commercial property brokers, Loc8 Commercial said, "It has been an interesting year across the commercial property market but we are very keen to see how other key UK cities start to grow as we head in to 2016".
The latest reports from both CBRE and Savills predict the record growth in the market seen since 2014 is set to continue but with significant improvements coming from the recovering local regional economies, particularly the South West and North West. Which means the good news will be continuing for serviced office providers who have grown their portfolios with new business centres and refurbishments.