The availability of office space in London’s Midtown fell during the first three months of the year despite a year-on-year decline in take-up, according to data from Farebrother.
Total availability fell by 15% to 1.7m sq ft between the end of last year and the end of March, pushing the vacancy rate down to 3.8%.
The fall was mainly due to a lack of new development as take-up was actually down by about a third on the first quarter of last year at 443,000 sq ft.
New and refurbished space has dominated leasing activity over the past couple of years, but in the first quarter secondhand space accounted for almost two thirds of take-up.
Jules Hind, Farebrother’s head of leasing and development, says the volume of secondhand space let in the quarter demonstrates “the breadth and depth of demand across the Midtown market”.
Three substantial deals drove the take-up figures in the quarter: Regus taking 31,156 sq ft at 60 St Martin’s Lane, McKinsey leasing 26,450 sq ft at The Post Building and Ennismore signing for 19,869 sq ft at Old Sessions House on Clerkenwell Green.
Hind says rents remain “firm” for good-quality space and that only a “modest amount” of new space is likely to hit the market this year.
“Midtown desperately needs more high-quality buildings,” Hind adds. “Occupiers’ interest in the very centre of London has never been so high; our market’s challenge is to provide the stock to meet their aspirations for new workplaces.”
He expects occupier demand to receive a further boost from the opening of the Elizabeth line at Farringdon at the end of the year.
In the investment market, it was a relatively subdued quarter. About £465m of stock changed hands in Midtown, which is 59% down on the fourth quarter – traditionally the busiest quarter of the year.
While large lots are becoming more “price sensitive”, strong competition is supporting prices in the sub-£10m market, says Farebrother’s head of investment Alastair Hilton.