With the vacancy rate down, the amount of space under offer up over 40 per cent relative to the historic average and serviced office take-up continuing unabated, space is running out in London’s West End office market.

At the end of the first quarter of 2018 we had seen an additional 1 million sq ft of office take-up in the West End, adding to the stellar performance of 2017 where total annual take-up was nearly 50 per cent ahead of the long-term average. Much of this is driven by serviced office operators and overall leasing activity leaves a vacancy rate of only 3.9 per cent, not including the 1.4 million sq ft under offer at the end of March, of which 550,000 sq ft is in the development pipeline.

So where does that leave us?

Of the 2.1 million sq ft of development and major refurbishment projects set to complete in the West End in 2019, 46 per cent (around 900,000 sq ft) is already pre-let, leaving a potential dearth of available space for future large requirements. Yes, we have seen an increase in the volume of ‘grey space’ coming to the market – space that may be available for sub-letting from existing tenants – however, the current level of demand, against a low vacancy rate, is seeing much of this space quickly re-let.

Occupiers are making their real estate decisions further and further into the future. To some extent this has always been true for the larger corporate occupiers, but the market is seeing evermore smaller firms also thinking ahead in terms of leasing commitments.

Based purely on market fundamentals, and ignoring macro-events, the remainder of 2018 through to the end of 2020 looks set to be vintage years for the small number of landlords delivering high-quality office space at scale.

Meanwhile, as demand for serviced offices continues, eating into the number of sub 5,000 sq ft lettings, 2018 is a year for landlords to really consider how best to deliver space to the market, whether to compete with serviced offices directly or to take meaningful steps to enhance service, facilitate community plus reduce the barriers of entry to their space.

Further information 

Read more: West End Office Market Watch