Commercial Property Trends 2015

Overview of London’s Commercial Property Market – 3rd Quarter 2015

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Across the United Kingdom, the third quarter of 2015 has been marked by acceleration in GDP growth rates and by the strong performance of the service sector. These factors have had a positive effect on the country’s commercial real estate market, which has experienced increased stability and growing demand over the past three months. This trend has been particularly evident in the British capital, as summarised in the report below.

London Office Market: Trends and Highlights

In line with previous trends earlier this year, the office market in central London has continued to be driven by increased demand and record rental values have been the predominant theme in the West End and core city office locations. A Cushman & Wakefield market report revealed that in August 2015, availability for all office space types in Central London dropped to 9.7 million square feet, a figure that represents a 3.7 per cent decrease over the previous quarter. This record-breaking figure is also below the decade’s average, which stands at 15 million square feet. According to the report, the amount of office space under offer in central London has also increased substantially during this past quarter, growing by more than 4 per cent, or 60 per cent higher than the past 10-year average. It is estimated that there are currently 4.4 million square feet of office space under offer in central London.

Another key trend that has emerged over the past quarter is related to the large number of FinTech start-ups that have been launched across London. CBRE market analysts have reported that FinTech clusters are now well defined in areas like Canary Wharf, which is home to nearly 10 per cent of all recent start-ups in this industry sector. Office space in the South Bank is also highly sought after by FinTech start-ups, with postcodes like EC2A and EC1V following suit, and with another FinTech cluster evolving in and around Tech City, also in East London. If current market trends are anything to go by, in the near future we can expect to see a surge in demand for incubator space coming mainly from FinTech firms, as well as larger floorplate requirements, given that many of these companies are ready for expansion. Continue reading “Overview of London’s Commercial Property Market – 3rd Quarter 2015” →

Overview of London’s Commercial Property Market – 2nd Quarter 2015

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During the second quarter of 2015, we have seen a continuation of the market trends that characterised the first quarter of the year. Overall, the London commercial property market has experienced sustained rental growth in most sub-markets, but particularly in the West End. Researchers attribute continued rental growth to the healthy levels of leasing activity and to the rather reduced supply of Grade A space, and they affirm that increasing rental prices will be the predominant theme in the city’s commercial property market for the rest of the year.

This trend is particularly evident in the London office market. According to PropertyWeek.com, supply shortages in the city’s office stock are becoming “serious” and total supply dropped by 4 per cent between January and May 2015.

The London office market Q2 2015

Rising prices are the main theme in areas like Shoreditch, Clerkenwell, and Southbank. This trend is contributing to reduce the office cost disparities that have characterised the city core market for years. It is expected that price gaps across postcodes will be further reduced as these sub-markets become more consolidated. Another sub-market that has greatly benefited from strong demand is Hammersmith. Property Week has reported that this office sub-market is becoming a highly-sought after location that has gone from being a peripheral market to an extension of the West End. Similarly, those areas of the Thames Valley that are closer to the city have witnessed a noticeable surge in demand. This increase in demand is most likely caused by the improved transport links that will become a reality thanks to the Crossrail project. According to Colliers International, by the end of this year the office market in this area is expected to grow by 13 per cent.

Demand for serviced offices in London has experienced further growth during the past quarter. The number of serviced office space in central London has grown by 11 per cent so far, and growth is even more impressive in areas like the Southbank, where growth levels are around 17 per cent. In fact, Property Week reports that this sub-sector has outperformed all other market sectors not only in London, but also nationwide.

As far as new office developments are concerned, the most noteworthy deal closed during the second quarter of the year involves the agreement signed by Brookfield Mutiplex. This US-based firm has agreed to develop a £1 billion office complex in what will be London’s biggest skyscraper. The building will be located at 100 Bishopsgate, and once completed it will add 900,000 square feet to the city’s office stock. Other important projects in the city’s development pipeline include 5 Broadgate (700,000 square feet), 1 Bank Street (nearly 670,000 square feet), and 1 Angel Court (300,000 square feet). Continue reading “Overview of London’s Commercial Property Market – 2nd Quarter 2015” →

London Office Space 2015: Farringdon

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Farringdon is strategically located just outside of the financial and economic hub of the City of London. Along with Clekenwell and Shoreditch, the area makes up the City Fringe North. It is one of two City fringe areas, with the other located to the east and comprising of Aldgate, Spitalfields, and Tower Hill.

Office Space in Farringdon

Farringdon refers to a historic area around Farringdon Station in the London Borough of Islington. Comprising of the wards of Farringdon Within and Farringdon Without, Farringdon is split between areas that once lay inside and outside the London Wall. Like many parts of London just north of the City, office space in Farringdon features warehouse and factory conversions. Sizes typically range from 1,500 to 5,000 square feet, according to property consulting firm Carter Jonas. The area often attracts media and creative industries looking for more affordable office space than traditional locations like Covent Garden, North Oxford Street, and Soho. The northern City fringe also attracts companies in the technology sector, particularly due to its close location to capital markets for tech companies in nearby Shoreditch and popular business incubator programmes in the area. Continue reading “London Office Space 2015: Farringdon” →

Overview of London’s Commercial Property Market – 1st Quarter 2015

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Following a year of exceptionally strong returns on commercial property, the London market has started 2015 dominated by optimistic rental growth prospects and by changing occupier trends.


According to market analysts at Savills, activity levels began to accelerate in February across all commercial sub-sectors, being consistent with the trends observed during the past six months. London’s established reputation as a global hub for businesses in the knowledge economy has brought about an increase in the amount of funding devoted to research and development (over £1.5 billion a year according to the most recent data). This fact has had a clear effect on the London commercial property market, which continues to provide support to new startups and relocating businesses. In turn, this has prompted changing occupier trends. Companies who operate in the knowledge-intensive sector have begun to look for properties beyond the Tech City and other areas that traditionally had a strong presence of media and knowledge companies (such as Soho and London Bridge). New clusters have emerged in Stratford, Tottenham, and New Cross. These areas increasingly cater to the property requirements of small and medium-sized businesses, which made up 47% of all transactions during the first quarter of the year. The current floor space supply is set at 6.7 million square feet and vacancy rates average 6.9 per cent. The top rents achieved during this quarter reached £70 per square foot.

Office market trends

Availability has come under pressure due to the large number of commercial-to-residential conversions and to the significant level of commercial property being held as long-term assets. This is particularly the case in high-value areas like St James or Mayfair, where up to 80 per cent of the office floor space is locked up by investors.

On the positive side, we can highlight the successful redevelopment of the King’s Cross – Euston corridor, also known as the Knowledge Quarter. Here, more than 350,000 square feet of commercial floor space have been taken up in a single transaction, the sub-lease of 6 Pancras Square. According to GVA Research, prime office properties in Camden and King’s Cross have experienced large increases in rental values, driving occupiers out and towards nearby locations like Clerkenwell and Shoreditch, where rents average £57.50/sq ft. Rents in Midtown range between £62.5 and £72.5/ sq ft. Continue reading “Overview of London’s Commercial Property Market – 1st Quarter 2015” →