2023-07-26-莱坊-The_London_Office_Market_Report_2023_Q2_13页_2mb

London Office Market Report Q2 2023 Summary

Executive Summary

Despite economic challenges, occupier demand for office space in London remains resilient. Take-up volumes reached 9.67m sq ft in Q2 2023, a 20.7% decrease from the previous quarter but still above long-term averages. Demand is polarized around quality spaces, with prime space (new/refurbished) accounting for 58% of availability.

Key Themes

1. Resilient Occupier Demand: Legal and financial sectors recorded significant deals. London's business activity remains strong but growth has slowed.
2. Rising Availability, Low Utilization: Vacancy rates increased across regions, while take-up slowed. Prime space remains concentrated in a few buildings.
3. Interest Rate Impact: Higher rates have driven rental growth, especially in prime core areas. Investment volumes dropped significantly (39.2% year-on-year) due to the economic outlook impacting sentiment and liquidity.

Market Insights by Region

• West End: Strong rental growth (West End Core rent at £135/sq ft), but overall take-up decreased by 32.7% YoY. High vacancy rates (7.1%).
• City & Southbank: Take-up increased by 24.2% quarter-on-quarter, supported by financial activity (42.4% of transactions). Vacancy rose to 11.1%.
• Docklands & Stratford: Weakest performance with subdued take-up and subdued market sentiment, further constrained by rising yields.

Investment & Development Trends

• Investment slowed significantly, with yields rising by 50bps, reflecting declining sentiment.
• Deal activity concentrated on private capital and REITs, driven by value-add properties.
• Speculative space completed nearly 2m sq ft in London, though lettings remains robust.

Key Data Points

• Take-up: London total 2.11m sq ft (YoY drop 33.9%).
• Vacancy Rate: Overall at 10.2%, with differentials by submarkets.
• Rental Growth: Driven by prime space in high-demand zones, rents up significantly in West End.

This summary highlights the key factors influencing London's office market in Q2 2023.