London Midtown Office & Retail Markets
Our extensive research provides a detailed and often unique insight into office and retail markets in London Midtown. In conjunction with Union Street Partners, we also focus on the London South Bank commercial property market.
In Midtown, we track quarterly take-up, availability, future supply and investment activity in WC1, WC2, part EC1 and part EC4 for two property cycles. Our research is backed by the insights of our highly experienced property professionals and is considered among the most reliable and focused for this market.
Our quarterly reports are published alongside our annual 'Centre of London' research, which monitors the area running from the top of Midtown’s northern border at King’s Cross through to the South Bank, and our bi-annual Midtown Retail Bulletin, which provides a detailed insight into the exciting retail and leisure changes in this continually evolving market.
The London Midtown Office & Retail Markets Q2 2018
Office take-up across London’s Midtown rose by 43% in the second quarter of the year as the market experienced steady demand and declining supply. Just over 631,000 sq ft of offices were leased in Q2 which was a significant uplift on Q1 and meant that 1.1m sq ft of Midtown space has been let in the year to date. There is steady demand across the market and a vacancy rate of only 3.4%. This level of vacancy equates to around 1.5m sq ft - well below the long-term average of 2.5m sq ft. The current speculative construction pipeline is only 1.1m sq ft but occupier’s appetite for high quality space is clear; over half the space let in Q2 was new or refurbished space. Farebrother are monitoring over 560,000 sq ft of space which is currently under offer which should mean that these trends continue through to the end of the year.
Occupier enthusiasm for Midtown was matched in Q2 by investors. The three months between April and June saw investment transactions reach £1.2bn which brought the half year total to £1.67bn. This is the second highest H1 volume since the market saw £1.75bn of deals transacted in the first half of 2014. In line with the rest of London, international capital is still the dominant factor. During Q2, overseas investors accounted for 85% of total turnover.
The Midtown retail and leisure sector is still seeing strong levels of occupational demand, albeit a higher level of flexibility and creativity is often required to attract occupiers. There is definately a positive outlook beyond this temporary period of unrest, but change is vital to this process. The second Grimsey Review has gone some way to map out what needs to change, but delivering this vision will very much depend on political will - at a time when the Government already has a lot on its plate.
The London Midtown Office & Retail Markets Q1 2018
A decline in availability in London’s Midtown in the first quarter of 2018 sent the vacancy rate down to 3.8%. After last year’s strong level of office take-up, sustained occupier demand faces the lowest level of speculative space under construction in the past five years.
The total supply of available space shrank by 15% between Q4 last year and the end of March this year. Although leasing activity was down by around a third quarter-on-quarter, the volume of second-hand space that was absorbed during the first three months of the year demonstrates the breadth and depth of demand across the Midtown office market.
The professional services sector was the most active, accounting for 30% of named take-up. Q1 was dominated by second-hand take-up, approximately 65% of the total space let during the quarter. The “normal” market conclusion to draw would be that this sector is set for rental growth but Farebrother is not seeing this; pricing remains keen with the anticipation of increasing amounts of tenant stock influencing negotiations.
It is anticipated that the continued high demand for new and refurbished space and lack of any meaningful pipeline will sustain future strong rental performance at the top end of the market. Occupier demand will be further underpinned by the opening of the Elizabeth Line and the connectivity transformation that it will bring, particularly around Farringdon.
The London Midtown Office & Retail Markets Q1 research explores our key findings for the Midtown market in more detail, examining leasing, investment turnover and future supply for the rest of 2018
Farebrother regularly contribute to and host events, receptions, presentations and round table discussions focused on the Centre of London for investors, developers, occupiers and managers. Please contact Adrienne Kearney for further details.