However, within this trend it was clear that demand from European-owned businesses was softening and has slumped further in the year-to-date, to its lowest level since 2001. Concerns about the UK’s manner, timing and even probability of its departure from the EU, have led to a pronounced level of caution from potential continental occupiers.
Transactions over 5,000 sq ft by European occupiers were 71% below the 10-year average in 2018 and the numbers have only deteriorated further in 2019. As at May 2019, letting activity by European occupiers was a stark 91% below the long-term average for the first five months of the year.
The largest commitment of the year-to-date, ironically, has been by the European Bank for Reconstruction and Development (EBRD), which although not classified as a European body (because it’s owned jointly by 67 countries) still contributes to overseas take-up.
The bank has taken 365,000 sq ft at 5 Bank Street, E14, where 2,500 staff will be based, moving from Exchange Square in the City of London.
While the mid-level, European-owned operations appear to be adopting a wait-and-see attitude to relocations and new commitments to real estate, non-UK/European/North American operators seem remarkably unphased by the whole Brexit process. Boosted by the deal to EBRD, transaction levels by ‘Other’ occupiers are already above average in 2019 to date. The 1.2 million sq ft transacted in 2018 is on course to be repeated this year.
Reductions in average deal size remain to the fore. Overall, average deals were smaller than at any time in the past decade. While the average for UK firms has risen in 2019, the number is still significantly below the 10-year average (-25%). Caution remains the watchword, across all sectors - and nationalities.