Central London Marketbeat - Q3 2019

Hayley Armstrong

Senior Research Analyst

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London Marketbeat Q32019

Central London Marketbeat provides an overview of the occupational and investment markets across Central London on a quarterly basis. It summarises the property market fundamentals, such as take-up, supply and rents in the main markets - City, West End and East London.

Take-up

Leasing activity across Central London remained relatively stable with 3.0 million sq ft transacted in the third quarter of 2019. This brought 2019 year-to-date leasing volumes to 8.6 million sq ft, 5% below the corresponding period in 2018 but 2% above the five-year Q1-Q3 average of 8.5 million sq ft.

Supply

Supply levels increased marginally during Q3 to stand at 13.0 million sq ft, reflecting a vacancy rate of just 4.8%. Total supply is now 6% below the ten-year quarterly average of 13.8 million sq ft. The volume of New Grade A space on the market remained constrained, with just 6.3 million sq ft available at the end of September, equating to 48% of total supply.Under offerThe volume of space under offer continued to rise, increasing 12% over the quarter to reach 3.8 million sq ft at the end of September. Total space under offer is now 35% ahead of the five-year quarterly average which should support leasing activity in the final quarter of the year.

Investment volumes

Central London investment volumes dipped slightly over the quarter to reach £2.4 billion in the period from July to September. This brought the total year-to-date volumes to £7.6 billion, which remained below the amount transacted during the same period in 2018 and the five-year Q1-Q3 average. UK investors were the dominant source of capital into Central London during Q3, accounting for over a third of all investment volumes.

Outlook

The political situation in the UK remains in a state of flux heading into the final quarter of 2019, although Oxford Economics estimate that the most likely outcome of the Brexit negotiations has shifted away from a ‘no-deal’ scenario towards a deal being agreed. Considering this continued uncertainty, as well as the fact that we are in the mature phase of the cycle, the Central London office market has held up relatively well in the three years following the EU referendum result.