After the summer break, it’s now back to business, and for businesses approaching an expiry on their office lease, thinking ahead can pay dividends in today’s market.
Despite continued economic uncertainty, occupier sentiment seems to be mounting, with office take-up across central London at its highest level post the EU referendum. This strong occupier activity has been a feature of the London office market in the first half of this year, with BNP Paribas saying that take-up of space was 26% ahead of the same period last year. This has been especially evident in offices below 5,000 sq.ft, with deals up 21% on H1 2017.
In the City, healthy demand has continued the downward pressure on available space. Vacancy levels in the City are now significantly below their 10 year average, and JLL highlights that any new build supply is being quickly absorbed by the market.
The picture is similar in the West End, with BNP Paribas pointing to the combination of strong demand and a restricted development pipeline resulting in supply falling to its lowest level since Q1 2016. According to Colliers International, West End vacancy rates have dipped below 5% for the first time since the start of 2017, and new or refurbished availability is fast approaching a record low, having fallen by over 60% in the past 12 months.
Both Midtown and the Southbank have also experienced buoyant demand, with vacancy rates here also well below 10 year averages. The Southbank has especially been feeling the squeeze, with vacancy rates reaching record low levels of 2.59%, the lowest of any London sub-market, according to BNP Paribas.
So what does this mean for tenants approaching a lease expiry? Well, tightening supply means it now pays to activate property searches earlier than previously in order to secure your preferred space. Nowadays, we recommend to our clients looking for spaces under 5,000 sq.ft to start their decision-making process at least 6 months before lease expiry. For properties between 5,000-15,000 sq.ft we recommend starting up to one year beforehand and, for bigger properties, an 18 month time frame is recommended in order to provide the widest choice available.
At Cityspace, we’re getting an increasing number of enquiries from clients asking us to undertake research on potential sites and costs. Using our extensive property database, we’re able to very quickly provide clients with a range of choices, looking at both on and off-market opportunities. And for new opportunities that we identify, our initial Evaluation Report can help clients with their decision making by giving them a clear view of potential costs and time-frame.
If you’re approaching a lease expiry, our advice in today's market is to think ahead in order to open up the widest possible options. If you would like us to help you assess your office options, please do get in touch.