Commercial Property

City in the East – London Plan

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In October 2015, the mayor of London unveiled his office’s development plan for several neighbourhoods in East London and to the south of the River Thames. This initiative is part of the London Plan, an ambitious project that was initially presented to the general public in 2004. The main objective behind the new City in the East plan is to promote the socio-economic development of designated Opportunity Areas within the British capital.

Below is a detailed description of the plan and the benefits that it will bring to local residents once completed.

City in the East: An Overview

The City in the East Plan is a collaborative project that will bring together the Greater London Authority, local borough councils, Transport for London, and a number of stakeholders from both the public and private sectors. The plan aims to consolidate and build on previous urban development projects, such as Thames Gateway.

City in the East will focus on the creation of employment and on the development of quality housing by capitalising on the large amounts of brownfield land available in this part of the city, and by transforming it into mixed-use developments. Overall, it is expected that the implementation of this plan will benefit approximately 600,000 Londoners and will result in the creation of 280,000 jobs and 200,000 homes. At the same time, the City in the East plan will help prepare the UK’s capital city infrastructure for future demographic growth, as it is expected that London’s population will increase by nearly 2.5 million by 2050.

Opportunity Areas and Housing Zones

The City in the East plan will affect a total of 27 Opportunity Areas and Housing Zones.

The largest area is Olympic Legacy, where 32,000 new housing units and 50,000 jobs are to be created. This Opportunity Area covers Olympic Park, the northern and southern Olympic Fringes, Hackney Wick, Fish Island, and Stratford. Approximately 1.3 million square metres of commercial space will also be built in this Opportunity Area. Continue reading “City in the East – London Plan” →

Overview of the London Commercial Property Market – 2nd Quarter 2016

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The London commercial property market started the year with moderate rental growth levels and a slight decrease in investment levels. As expected, the second quarter of the year has been marked by the results of the EU referendum vote, which has had a direct effect over the property market creating a rather volatile situation in most property sub-markets, but especially in those with high levels of foreign activity, such as London.

Although there seems to be no agreement on the long-term effect of the uncertainty caused by the referendum results, most analysts agree that a weaker pound may attract foreign investors who want to add to their portfolio by acquiring commercial properties in London while the exchange rates are favourable. See below for a detailed report on the latest trends affecting the London commercial property market during the past 3 months.

Office Market

During the second quarter of 2016, monthly office take up rates were just under 1 million square feet, below the past decade’s historical average (1.1 million). May was the best month for the office market, with over 900,000 square feet of office space taken up. There were virtually no changes in availability rates, and according to researchers at CBRE, 12.9 million square feet are currently available in the British capital.

Post-EU referendum uncertainty has affected the office market, as a number of prospective investors have put enquiries on hold, while others who already own office properties in London are debating whether they will move their operations elsewhere. Rental value growth has been directly affected by these events, as growth rates have dropped to their lowest index of the past 3 years in areas like Midtown and the West End. Continue reading “Overview of the London Commercial Property Market – 2nd Quarter 2016” →

Overview of London’s Commercial Property Market – 1st Quarter 2016

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During the past two years, the London commercial property market has performed strongly, ending on a high note in December 2015. However, and as expert analysts predicted, 2016 is set to bring about some qualitative changes into the capital’s commercial property market. Below you will find a detailed overview of how the market has fared during the first quarter of the year.

London Commercial Property Market Q1 2016: An Overview

Moderate rental growth has been the key theme emerging from the commercial real estate activity that has taken pace in London over the past quarter. Rents have remained relatively flat across all sub-markets (but especially so in the office sector) despite the rising interest rates. Investment activity also slowed down during Q1, and on this front average returns on commercial property were in the region of 7.5 per cent, slightly lower than 12 months ago. The slowdown has been evident in capital growth rates too, which averaged 2.9 per cent for central London offices, 4.1 per cent for retail properties, and 1.6 per cent for industrial space.

Another important theme that has emerged during the first quarter of this year relates to the impact that the so-called Brexit could have on a market where a large percentage of transactions are backed up by foreign investors. The vast majority of commercial property experts agree that commercial property prices would drop substantially should the UK leave the European Union. Britain’s exit could also result in a dramatic decline in the amount of foreign capital pouring into the London market. In fact, some market analysts affirm that European investors are already putting large-scale property purchases on hold – and may continue to do so until the vote takes place in June. Nevertheless, and until then, enquiries and demand for London properties should remain relatively strong, especially when compared to regional markets. Continue reading “Overview of London’s Commercial Property Market – 1st Quarter 2016” →

The London Commercial Property Market: An Overview of 2015

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4th Quarter – Commercial Property Market in London

As 2015 comes to an end, it’s time to sum up the key trends that have characterised the commercial property market in London over the past 12 months. The latest RICS UK Commercial Market Survey highlighted the growing demand experienced across all commercial property sectors, and in particular with regards to office and industrial properties. As expected, increased demand has resulted in higher prime rental values across all sectors. These averaged a 9.4 per cent increase in office rental prices, 7 per cent for retail stock, and just below 4 per cent for industrial properties (1).

The retail market benefited from exceptional levels of consumer confidence, which are at their highest since the late 90s. Annual change rates for retail rents in the West End averaged 14 per cent, whereas in the City they stayed at 4 per cent (2). Citywide, rental growth averaged 13.2 per cent. Vacancy rates dropped to 3 per cent, a figure that stands in stark contrast with this year’s national average at 14 per cent. Another key trend this year had to do with the performance of the industrial market, which experienced a boost as the e-commerce sector solidified its presence (3).

Office Market – Q4 2015

During the last quarter of 2015, the London office market has continued to display robust activity levels. At the beginning of Q4, year-to-date take up levels amounted to 9.7 million square feet, a figure that represents a 3 per cent increase over last year’s values. Most transactions involved firms involved in sectors like professional services, media and technology, and banking.

According to research data published by BNP Paribas, during November and December the main trends affecting the London office market were above-average leasing activity and a surge in investment levels. Vacancy rates dropped to 4.28 per cent in November, although this figure is likely to increase with the delivery of more than 7 million square feet of Grade A space over the course of 2016. Year-to-date take up rates reached 12.40 million square feet in early December (4). Continue reading “The London Commercial Property Market: An Overview of 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 in top place as the world’s most expensive office market

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The London office property market has cemented its position in top place among a host of prestigious global property markets for the third year running.Throughout 2014, several indicators suggested that the average cost of office floor space in the capital was rapidly rising. Take up rates rose consistently during 2014, and so did the level of transactions and the amount of office space under offer. This year, London has consolidated its position as the most expensive office market at international level, ahead of key global players like New York or Hong Kong. Take a look at the details behind the stellar performance of the London office property market.

London: The world’s most expensive location for office space


A recently released Cushman and Wakefield study entitled ‘Office Space Across the World’ published a comparison of rental costs between some of the world’s most desirable office locations, which in addition to London included New York, Hong Kong, Paris, Sydney, and Tokyo. London came in top place as the world’s most expensive office market for three consecutive years. Over the past year, average office rental values in the city have increased by 4.6 per cent. The cost of office floor space in London is still far from returning to pre-recession values, as it remains 13% per cent lower than its 2007 values, but market analysts predict that the current trends are here to stay. As the availability of office space continues to decline, prices will rise even further throughout 2015 and beyond.

The main reason behind this upward trend is the ever-shrinking gap between supply and demand. London’s reputation as a global business centre attracts both entrepreneurs and experienced business owners to the British capital, and the effect of unwavering demand on the commercial real estate market is obvious. In the West End, supply has been dwindling since 2007, and currently vacancy rates hover around 3 per cent. This has allowed landlords to rise prices accordingly, pushing average costs to a new record high of £1,681.40/ m2 per year. To put this figure into perspective, consider the average costs of prime office space in the world’s second and third most expensive locations. In Hong Kong, office space in the central business districts averages £1,173.54 / m2 per year, whereas in New York average costs are in the region of £833.53/ m2 per year. Increasing costs seem to be a global trend, since during the past year office rental values have grown by an average of 7 per cent across the major global office markets. Continue reading “London in top place as the world’s most expensive office market” →

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” →

London Office Space Growth Areas 2015: Whitechapel

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In close proximity to London’s major financial district Bishopsgate, Whitechapel is quickly rising as a prominent spot for growing businesses. Alongside this excellent locale, Whitechapel is serviced by numerous travel links. Using these links – whether taking the one of the numerous bus lines that service the area or hopping on the underground – Liverpool Street is only 6 minutes travel, while Canary Wharf is only 20. Another advantage of the Whitechapel area is that, as it is approximately three and a half miles from the city centre, the majority of it is outside the congestion area.

The current position of London office space has reached a plateau after a period of growth following a stagnant period. Confidence in the London market remains at a comfortable high, despite the general referendum occurring in 2015. However, as construction rates begin to level off, West End rental rates have begun to rise significantly. As a result of this, many new and already established businesses look to areas of London which have been previously undiscovered – such as Whitechapel. Having transport services to the city centre and other business parks as easily found as those in Whitechapel makes this region an in-demand location. Continue reading “London Office Space Growth Areas 2015: Whitechapel” →

London Office Space Growth Areas 2015: King’s Cross

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Despite high political tensions in 2015 as general and mayoral elections loom – and particularly as the EU referendum comes ever closer – confidence in London as a commercial hub appears to remain stable. However, construction levels are slowly coming to a standstill as projects finish and no new ones begin, causing rental rates in the West End to begin rising significantly. As such, businesses looking for commercial property in London are beginning to broaden their horizons in terms of office markets.

London office space rates remained at a steady level in 2014, with investments totalling just under £20 billion being pumped into the sector. That being said, 2014 ended with some surprises as some of London’s ‘trophy assets’ were seen to change hands – for example the famous Gherkin, which was purchased last year by the Brazilian/New York dynasty Safra. Indeed, with rental prices continually on the increase, a second surprise was seen as some of the previously more obscure sub-markets of London began to billow with success. Continue reading “London Office Space Growth Areas 2015: King’s Cross” →

Key Office Space Trends and Statistics for London 2015

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The London commercial property market is expected to show positive results in 2015. During the last year, office property market sector has shown of a number of trends including accelerated rental growth, declining vacancy rates, and stable investment yields are some of the key trends that have characterized the office market across most London areas over 2014.

The key trends expected across the London office space rental market include increased demand, vacancy rates as low as 4.5%, an increase in rental costs across London up by 4.3% overall and the commercial property market as a whole expected to experience double digit growth.


London office rental market 2015 - Key trends infographic