City Leasing
Overview
Q3 witnessed an increase in demand for the Central London and City markets, improving on the previous quarters’ take up to a total of 2.6M sq ft, with 52% accounted for by the City and City Fringe markets.
The flight to quality continues with over 75% of take up being Grade A this quarter. The majority of 8 Bishopsgate is now under offer or leased with only the upper floors remaining. Significant lettings to Kirkland and Ellis, Proskauer Rose and Wilson Sonsini have further driven activity from the professional and legal sectors. Many occupiers are now having to consider pre-let opportunities for ‘Best in Class’ product ahead of their lease expiries given the reduced pipeline expected in 2024 and 2025.
Take up for the year to date in the City and Fringes is at 3.9M sq ft and in line with the long term average. The under offers remain high with 3.8M sq ft under offer across Central London, with 1.5M sq ft under offer in the City and Southbank. This is a 14% increase on the previous year, which is largely driven by the current transaction to relocate HSBC from Canary Wharf to Panorama, St Pauls for 550,000 sq ft.
Total availability for the City remains at 10.8% with supply levels at 14.6M sq ft. By comparison Central London availability is 25.5M sqft, 9.5% vacancy. Second hand availability accounted for 17.3M sq ft, well above its long term average, with newly completed grade A at 4M sq ft, which is a 7% decrease on the previous quarter.
Prime rents continue to rise with typical Grade A rents at £77.50 per sq ft for the City. ‘Best in Class’ rents are now regularly achieving in excess of £100 per sq ft with evidence now witnessed at JJ Mack, Farringdon, 8 Bishopsgate and 22 Bishopsgate.
Many businesses are now working with a fixed routine of 4 days working from the office which has resulted in the increased demand for new office space and a reconfiguration of offices to encourage more modern ways of working.
Headline Market Deals
The theme of significant take up from law firms has continued into Q3 2023. Kirkland and Ellis took up the option space at 40 Leadenhall Street securing a further 173,500 sqft in addition to their original space take. Proskauer Rose relocated from Salesforce Tower to secure a new headquarters of 57,913 sq ft at 8 Bishopsgate and Wilson Sonsini signed for 32,584 sq ft at Eden House in Spital Square for a new central London headquarters.
Headline Allsop Deals
Allsop transacted three significant deals this quarter which included the letting of 37,000 sq ft to Orega at 70 Gracechurch Street providing 650 workstations, the letting of 36,782 sq ft to Global University Systems at The Amp, Commercial Road on behalf of LaSalle and Trilogy and the letting of the part 19th floor of The Shard comprising 10,001 sq ft to Revantage on behalf of MPS.
The Amp, Commercial Road
70 Gracechurch Street
Direction of Travel
The City office market has continued to see strong demand for ‘Best in Class’ stock as we enter Q4 2023. The knowledge of a tighter supply chain leading into 2025 and 2026 is likely to lead to increased pre-letting activity for off-plan prelets and prelets during construction. Many of the ‘Best in Class’ products are now witnessing an increase in rents and more upper floors continuing to break the £100 per sq ft barrier.