West End: Transaction levels moderating but levels of demand remain steady
By Bridging Loan Directory -
West End vacancy has remained unchanged over the past few months as transactional activity for built space has slowed, according to the first West End Occupier Snapshot from Colliers International.
Major pre-lets to Camden Council, who have taken 120,000 sq ft at the Argent Development, Kings Cross Central and Debenhams, who have taken 160,000 sq ft at British Land’s Regent’s Place have eaten into pipeline space, but take-up of existing product fell by 30% in Q3 2011.
Despite the AirW1 development of 160,000 sq ft completing ahead of schedule and with two substantial pre-lets, Generation Investment Management taking 23,000sq ft and O2 parent Telefonica under offer on 70,000 sq ft Grade A availability is still seeing downward pressure with Grade A availability falling by 30% year on year. Halfords Media (40,000 sq ft) have also identified AirW1 as a potential option
Named demand remains dominated by media and technology occupiers.
Guy Grantham, Director, Research and Forecasting, says: “Colliers International has identified 2.4 million sq ft of technology, media and telecommunications demand currently in the market place alone. The rise in rental levels, lack of Grade A supply and competition from non-traditional occupiers, is forcing high profile media tenants to seek space further east. Lastminute.com has taken space in Derwent London’s Johnson Building, EC1 and Saatchi & Saatchi is shortlisting a Midtown location for its new HQ.”
Further significant deals are likely to be confirmed before year end. Pimco has signed for 57,000 sq ft at 11 Baker Street, W1 and Nokia is under offer on 60,000 sq ft at 2 Kingdom Street, W2. Ogilvy and Mather have a requirement for 175,000-200,000sq ft and have shortlisted two buildings.
David Hume, Head of Tenant Representation at Colliers International, says: “While active demand, the modest short term supply pipeline and a healthy level of lease events occurring in 2012, suggest an environment for growth, economic uncertainty remains the prime motivation behind the decision making process. Transactions continue to be protracted with a rising number of occupiers looking to regear leases and renegotiate terms in their current premises. Nevertheless, there is still scope for further modest rental uplift at the top end of the market as lack of new supply rather than increased demand drives Grade A vacancy down further.
”Kings Cross is increasingly on the radar of occupiers when considering their options. This momentum will only increase as more occupiers take pre-lets. This is typified by Google, who are in detailed discussions on purchasing up to four buildings totalling up to 800,000 sq ft. The Telecommunications, Media and Technology sector is currently the engine room.”