Steady stream of larger requirements provides hope for more active 2024
We continued to see subdued levels of leasing activity during the penultimate month of this year, with leasing reaching 191,946 sq ft across 20 transactions. This brought take-up at the end of November to 2.6m sq ft, which is down 31% on the ten-year average. We are anticipating year end take-up will reach 3.1m sq ft, down 26% on our predictions at the start of the year.
The largest transaction to complete over the month was UK FinTech firm Paymentsense’s acquisition of additional floors at the Brunel Building, W2, taking the third to fifth floors (49,566 sq ft) on a 13-year term for £75.00 per sq ft. This, is in addition to the eighth and ninth floors which they already occupy and at just shy of 50,000 sq ft, was the fifth largest transaction to complete this year. By comparison over the past decade at this point in the year, typically around ten transactions over 50,000 sq ft have completed.
With Grade A transactions accounting for 89% of space acquired this year, the average Grade A rent at the end of November stood at £91.91 per sq ft, up 5% on the same period during 2022.
Also up 5% on the previous year was the average Prime rent, which currently stands at £134.14 per sq ft, ahead of our forecast for this year of £131.34 per sq ft, with limited supply and higher levels of demand across the core continuing to drive rental growth. Robust demand from occupiers for best-in-class space, combined with the higher cost of development finance has meant we are forecasting prime rental growth of 3.6% per annum over the next four years.
Levels of underlying demand across Central London and the West End have remained broadly stable over the quarter, with space under offer standing at just over 1m sq ft and active demand at 5.3m sq ft.
Encouragingly, the quantum of occupiers with West End-only requirements has increased by 118% to 2m sq ft when compared to the start of the year, giving encouraging signs we could be set to see activity pick up at the start of 2024. 32% of West End-only requirements (by number) of occupiers are sized between 15,000 sq ft and 25,000 sq ft.
Perhaps unsurprisingly, given the high level of activity we have seen from the sector over the course of the year, Financial Services makes up the highest proportion of these requirements by sq ft at 36%, followed by the Tech & Media sector with 21%. However, of the 14 larger requirements (50,000 sq ft+), it is a more balanced picture with Financial Services, Extraction & Utilities, and Tech & Media accounting for three each.