Tenant supply…tenant supply… and more tenant supply. That was the story that was being projected as the pandemic took a hold of the UK back in March 2020. However, as momentum in the London office market picks up again a different narrative can be told. We are increasingly seeing West End occupiers reversing their decisions to give up their office space, deciding to withdraw it from the market in favour of reoccupying it themselves.
Currently, the overall amount of grey space in the West End is 2.45 million sq ft, the lowest it has been since November 2020, and 19 per cent below its peak in April this year. Unsurprisingly, tenant space put on to the market since the beginning of the pandemic makes up the majority of this space, accounting for 73 per cent. However it seems space is leaving almost as quickly as it arrived.
So far this year 867,286 sq ft of space has been withdrawn from the West End office market, 95 per cent more than the amount that was removed last year. Looking introspectively at this figure, and breaking it down by landlord and tenant supply, the story becomes clearer.
From this year’s total, withdrawn tenant supply accounts for the lion’s share of space, at 77 per cent (668,050 sq ft). Of this, 83 per cent was on the market for less than a year, supporting claims that an element of impulsivity rippled through the office occupancy market last year. But which business sector has been leading the charge in taking back their space?
Along with accounting for the largest sector take-up in 2021 so far, the tech & media sector also makes up the majority of tenant space that is being withdrawn, accounting for 45 per cent. The first chunk of space to disappear came from the creative industry company Technicolour who, after putting it on the market in September 2020, reoccupied 17,489 sq ft of space at 119 Wardour Street, W1 at the end of Q1 this year.
After this, more companies began to follow suit and most recently the creative agency company, Leo Burnett, withdrew its 63,511 sq ft of space at Warwick House, W14, from the market. In fact, this was the largest withdrawal from an occupier so far this year, tenant or landlord.
Other sectors are also doing the same. The second largest business sector to be withdrawing tenant space is retail & leisure, with 16 per cent, followed by insurance & financial with 11 per cent.
So what does the future hold? In short, this won’t be the last time the words 'tenant supply' and 'office market' are uttered in the same sentence this year, but perhaps the conversation will be more positive than before. There is a further 478,285 sq ft of tenant space with lease expiries that end between this year and next, which most probably will be reabsorbed back into the market. This coupled with more occupiers choosing to reoccupy space bodes well for the future of the West End office market.
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