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  1. May 2019

  2. London office occupiers facing space squeeze

    28 May 2019
    A 20-year record low for speculative space is leaving London with a seriously-eroded development pipeline of just 1m sq ft – enough to satisfy less than three months of demand at current levels.
    Supply of new development space is almost at a standstill and, while 2020 will see new product delivered, the intervening shortage will continue to provide occupier motivation for securing pre-lets. Speculative development levels are at their lowest in almost two decades and overall availability remains 15% below the 10-year average.

    We’re now anticipating a supply/demand imbalance in the second half of this year with downward pressure on incentive packages preparing the ground for future rental rises.

    This scarcity of good quality space is impacting take-up which dipped to an 18-month low in the first quarter of this year. However, the prevailing strength of demand is reflected in the fact that – even in the face of these conditions – the Q1 transaction levels were only 10% below the 10-year average.

    There is currently over 4m sq ft of space under offer across London as a whole and in Q1 more than 36 individual deals were negotiated for units in excess of 20,000 sq ft.

    Not surprisingly, prelets are increasingly prevalent in the London office market: more than 1m sq ft of space is under offer on a pre-let basis, while an additional 300,000 sq ft of new and refurbished space is also in solicitors’ hands.
    The Author
    Paul Smith
    Director and Co-Head

    02074871767

    07711468891

    paul.smith@colliers.com