Out-Law News | 22 Oct 2014 | 4:23 pm | 1 min. read
According to figures for Q3 from DTZ, increased year-on-year take up of office space in central London has left the capital short of offices that are ready to occupy. DTZ's latest London office market update reported a 15% rise in office uptake compared with September 2013, with 10.4 million square feet taken up in 2014 so far.
DTZ identified a particular shortage of lower quality, grade B office space in the capital, with only 850,000 sq ft available for occupation in central London. Central London's overall stock of grade B space was at a 13 year low of 5.1m sq ft, reported DTZ, a decrease of 74% in the past 10 years.
"Most people focus on prime space but availability of grade B is also important to London's increasingly diverse economy," said Sophy Moffat of DTZ."Tech, creative, media and start-ups make up a large share of central London's industries, but the cheaper, and typically older, office buildings these kinds of firms flock to, such as converted warehouses in Shoreditch, seem to be in short supply."
Similar trends were reported last week by CBRE, whose Central London Office MarketView estimated that 8.3m sq ft of office space was available for occupation in Q3 2014, compared with 11.5m sq ft at the same point in 2013. CBRE said vacancy rates in the West End were particularly low, with less than 2% of office space in Soho, St James's and Victoria available.
CBRE said that availability in central London was likely to continue falling into 2015 and that levels would "remain below the 10-year average throughout the five-year forecast period" despite a likely increase in supply from 2016 onwards.
"An increase in occupier activity coupled with a limited development pipeline has led to a supply crunch," said CBRE executive director Phillip Howells in a statement. "The low levels of vacancy have fed through to the market in terms of rental growth, with all central London markets seeing increases in prime rent of varying degrees in 2014."
"With availability set to fall further throughout this year and into 2015, prime rent levels are expected to grow strongly in the medium term," added Howells.