While Q1 take-up reached 681,000 sq ft, more than 880,000 sq ft of offices were leased in Midtown from April to June.
In terms of availability, the supply of second-hand space rose by 38% to 1.34m sq ft. The availability of new and refurbished space combined, on the contrary, decreased by 31% to 748,949 sq ft.
“The Q2 take-up performance reflects good demand across a wide spectrum of space requirements and this shows that occupiers have a clear preference for new or refurbished space,” says Jules Hind, leasing and development partner at Farebrother. “The increase in second-hand space tells a different story, and indicates that businesses who are trying to divest themselves of surplus space may struggle unless they can be flexible about terms.”
WeWork continues to make a major impact on office market, as the company signed for 140,000 sq ft at Almacantar’s 125 Shaftesbury Avenue.
Speculative under construction reached 1.7m sq ft, which represents a 4% growth on last quarter.
Investment levels, however, dropped deeply, with just £164m invested in 11 transactions. Compared with the £625m in Q1, this means that investments decreased by 74%. Significantly, overseas investors were responsible for only £41m, contrasting the £394m in Q1. Buyers from the Middle East didn’t appear in the list at all.
There were few active sellers in Q2 and that has meant that volumes were well below the 10-year quarterly average of around £600m.
Some of the main transactions completed in Q2 included Framestore’s acquisition of 88,231 sq ft of space in Viridis Real Estate’s development at 28 Chancery Lane, and Disney Corporation’s commitment to 47,543 sq ft at Lacon London in Theobald’s Road.
According to Farebrother, while Central London volumes have remained strong, Midtown has been hampered by a lack of supply.
“More encouragingly, there are now some larger asset sales coming to the market, including Aldwych House, 10 Bloomsbury Way and Athene Place and these should improve market volume as we look ahead,” says Farebrother’s head of investment Alastair Hilton.
“Behind this the market for the smaller lot sizes remains robust with investors willing to place capital, albeit subject to sensible pricing.”