Central London office lettings have stalled in the first quarter of the year despite strong demand as deals take longer to get over the line, new figures reveal.
Latest research from property consultancy Savills shows 1.7 million sq ft of space was taken up in the first three months of the year.
That is below the 2.1 million sq ft of a year earlier, and also less than the equivalent pre-Covid 2019 quarter. It is 26% down on the 10-year long term average.
The slump comes as firms are taking longer deciding on how much space they need and how best to attract staff to headquarters, even if only for part of the week as hybrid working is embraced. Savills also said there are a high number of deals in negotiations.
Andrew Wedderspoon, central London leasing director at Savills said: “Office demand in central London in 2023 is up, rents are rising for ‘best in class’ and total space currently under offer is roughly 2.9 million square feet, 4% ahead of the five-year average. Yet deals are taking longer to complete.”
Richard Townsend, partner at real estate consultancy Allsop, said: “The next wave of transactions is taking slightly longer, mainly as a result of occupiers undertaking more rigorous analysis of their occupational strategies and focusing on what they want out of their office space — usually, the best quality with the highest sustainability credentials.”
He added: “‘Good enough’ is now no longer good enough for the majority of occupiers when taking offices and as such they are more focused on what they require than ever before - this means searches and ultimately transactions are taking longer.”
Developers are seeing good demand for modern space, but landlords with older buildings could struggle to attract new tenants.
Deals announced in the first quarter included global investment management company Pimco pre-letting just over 106,000sq ft at Derwent London’s 25 Baker Street development.
