Real Estate Market Outlook
Leasing activity across Central London noticeably improved during the first half of 2022, with 5.2 million sq ft of office space leased during the period, 46% of which was for grade A space.
Though we have spoken about the flight to quality trend for some time, the data for the market is now showing clear evidence of this. Supply volumes continued to erode, substantiated by robust demand and as at the end of Q2, there was 23.1 million sq ft available across the market, of which 42% is grade A space. This was the lowest grade A proportion since the end of 2010. Furthermore, the supply pipeline for the next five years looks constrained, with 39% of space under construction and due for delivery by 2026 already pre-let.
All that being said, the market appears to have moved away from the slightly unusual trends of 2020 and 2021, and the traditional supply and demand dynamics have returned – robust demand resulting in falling supply levels coupled with rising rental values on prime space. Though this bodes well for the market, as we move into the second half of the year, we do expect activity to be slightly more subdued, particularly over the summer months.
