Surge in activity expected as developer says amount of premium space after 2025 tails off
British Land has said the London office market is on the way to recovery after the impact of last year’s mini-Budget with the firm behind Sir Robert McAlpine’s One Broadgate scheme adding that take-up of space in the City is now beating the long-term average.
It said forward looking indicators in Q3 were “very encouraging with the volume of space under offer 8% above the 10 year average and active demand 27% higher”.
It added: “Demand remains focused on core markets, with location a critical criteria for occupiers. The City is performing particularly well with take up in Q3 exceeding the long term average by 5%.”
The developer said the effect of last September’s mini-Budget by the former Truss government was to send take-up rate in the first three quarters of this year tumbling 25%.
But it said take-up of space in the City in Q3 was up 5% on the long-term average with the banking and financial sectors leading the demand. Occupancy rates are around 96%, helping it report profit in the six months to September of £142m, up 3.4%.
“We are also seeing increased demand for larger requirements,” it added in its interim results reported this morning. “There are now 24 active requirements over 100,000 sq ft, compared with 11 at the start of the year. Furthermore, most of this demand is for best in class space.
“Supply is also constrained, with very low levels of best in class space being delivered beyond 2025. The result is that we are seeing strong rental growth for best in class space, particularly new space in the development pipeline.
McAlpine is already on site with British Land’s One Broadgate job, which is due to finish in 2025, and has been 100% pre-let to law firm Allen & Overy and real estate business JLL.
The firm is expected to build 2 Finsbury Avenue, designed by Daish architect 3XN, with British Land saying the job was one of “the next projects on our radar where we are having very constructive pre-letting conversations”.
It said that it had turned down an alternative tenant found by Meta, formerly Facebook, for its 1 Triton Square development. Meta paid £149mn to break its lease in September with 18 years remaining. The firm never moved into 1 Triton Square but let the space in 2021 following a major refurbishment.
To underline the strength of the recovery of the market, British Land said: “Although Meta had secured an occupier to take over their lease, we believed there was more value to be created by taking back the building given that market rents are now significantly higher than the rent they were paying.”
British Land said 1 Triton Square, which was redeveloped by Lendlease, was now part of its near-term pipeline and would be repurposed for innovation and life sciences occupiers. “We have a flexible plan to add lab space and [flexible office space initiative] Storey on the bottom floors whilst retaining best in class office space on upper floors,” it added. Impact Hub London, a firm behind innovation and life science organisations in London’s Knowledge Quarter, has agreed to take affordable workspace at the site, the firm said.
It said other schemes in the near-term pipeline included three logistics hubs at Paddington and Southwark, adding that it expected to commit to two of them, the Box at Paddington and Mandela Way in Southwark, shortly.
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