More tenants are looking to sublease office space in London during the last quarter, Bisnow London reports. There’s currently a little more than 19 million square feet in London, according to Cushman & Wakefield’s first quarter leasing data. Tenants looking to get rid of some of their current CRE footprint control 7 million square feet of that total. The 9% increase from the prior quarter means that tenant-controlled space currently comprises 37% of all space for rent. More than 300 tenant-controlled spaces were marketed at the end of the first quarter, with 60 units being added since January, according to Cushman.
Meanwhile, the vacancy rate hit 6.8%, the highest since 2013, but below the 7.8% that occurred during the Global Financial Crisis, Bisnow London reports. The amount of London office space leased during the first quarter of this year fell under the long-term average but was 117% higher than the fourth quarter of 2020. Overall, the amount of office space leased was below the five-year average for first quarter deals (2 million square feet). Cushman stated that an additional 2.2 million square feet is under offer, slightly below the prior quarter, Bisnow reports.
Legal Industry Leads
The legal industry comprised the biggest piece of office space leased during the first quarter of 2021 (24%). The banking and financial sectors were not far behind, with a 23% share of leasing volumes during that time period. Media and tech made up another 20%.
“Whilst sentiment seems to be gradually improving, we anticipate the next three to six months to be characterized by low take-up volumes and the potential for further increases in tenant supply,” Cushman & Wakefield said in its first quarter London report. “Forecasts suggest that leasing volumes will remain below long-term average levels, although the second half of 2021 should see an uptick in activity,”
The real estate firm also expects prime rents to soften throughout the year, plateau in 2022 and begin to grow again in 2023, according to Bisnow London. This won’t look the same for every property, however.
“Clearly, there will be buildings and locations that are better insulated against the short-term rental decline, with the demand for ‘super prime’ office space still healthy,” Cushman said.
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