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The vote to leave the EU coincided
with the summer lull and as a result
inertia was the underlying trend in
the leasing market. Nevertheless, the
market received a shot in the arm
in Q3 2016, with Apple committing
to c.500,000 sq ft in Battersea.
As a result central London leasing
volumes were up 22% quarter on
quarter. Q3 take-up volumes reached
2.4 million sq ft, up from 1.6 million
sq ft in Q2 2016, which took the year
to date figure to 6.7 million sq ft.
Leasing deals that were underway
in the run up to the EU referendum
are progressing, albeit slowly and
there are few signs that occupiers
have aborted deals as a result of the
vote. Almost 60% of deals under
offer pre-referendum have now
signed, with a further 19% under
offer and progressing, although
some with greater incentives for
the tenants. Just 21% are on hold or
are not proceeding, but this is not
necessarily a direct result of the vote.
The test to come will be with the
level of new space commitments that
will transact in the future. The rate
of space going under offer slowed
markedly in the aftermath of the
referendum. In the 12 months prior
to the vote, on average 2.1 million sq
ft of new commitments went under
offer each quarter but this dropped
to 1.5 million sq ft in the three
months since the vote. While July
and August were quiet, as occupiers
took stock, there was a flurry of
activity in September when almost
727,000 sq ft of space went under
offer, including five transactions over
50,000 sq ft and some substantial
prelets. As a result space under offer
was back to that recorded in June
2016. One must bear in mind that
these figures are being supported by
the length of time that transactions
are taking to translate from going
under offer to a signed deal.
But the scale of space under offer
at the end of September has shown
London’s occupiers are ready to
move forward when confronted by
the realisation that Brexit will not be
a quick process. The commitment
by Wells Fargo to a new office at
33 Central along with Google’s
announcement that they will push
ahead with their headquarters at
King’s Cross, creating up to 3,000
new jobs are significant illustrations
of this.
This does not disguise the fact
that uncertainty still prevails and
occupiers are reviewing their
property strategies, seeking better
terms or extending their leases in the
short term to allow them to assess a
post-Brexit London. In this respect,
2017 could be a challenging year for
the leasing market but ultimately
central London should remain
resilient and continue to be attractive
to businesses around the world.
By Hayley
Armstrong,
Research Analyst,
London Markets
Post-
Brexit
Leasing
Market
14.0
12.0
10.0
8.0
6.0
4.0
2.0
0.0
2011
2012
2013
2014
2015
2016
sq ft (millions)
Q1
Q2
Q3 Q4 Under offer
5-year annual average
1.0
1.5
2.0
3.0
2.5
0.5
0.0
Oct 16
Sep 16
Aug 16
Jul 16
Jun 16
May 16
Mar 16 Apr 16
sq ft (millions)
Total under offer less new
New under offer
The test to
come will be
with the level
of new space
commitments
that will
transact in
the future
Central London Leasing Volumes
Central London Under Offer Trends
CUSHMAN & WAKEFIELD
26
LONDON IN FIGURES