Since the Brexit vote, activity within the capital has remained buoyant, leasing volumes are reaching new heights and vacancy rates remain low – currently standing at 4.7%. Last year, 14.8m sq ft of office space was let, the highest level since 2014 and 15% above the long-term average.
The first half of 2019 has seen this momentum continue; leasing activity has remained in-line with the five-year average and lettings for newly built space almost 10% higher. The increasing demand for grade A office space is leading investors to target development or value add opportunities: this year has already seen 43% of the 11.3m sq ft of office space under construction already pre-let, showing encouraging returns for investors.
The finance and banking sector is responsible for a high volume of the leasing activity accounting for almost 30% of all lettings, which isn’t surprising considering the sector has created almost 6,000 new jobs since the Brexit vote – showing confidence amongst the worries and woes.
Despite high leasing volumes, JLL’s UK Capital Markets Review and Outlook H1 2019 report uncovered only £4.5bn was invested into the London office market in the first half of the year. This decrease is mainly due to investors holding off while they wait for some clarity around Brexit. That said, international investors have benefitted from the uncertainty with attractive discounts given the sterling’s current conditions, they have the capital to invest and London is still an attractive location.
All reports are anticipating this slow down to be short-lived. The core factors remain positive including increasing occupier demand, strong rental growth and limited availability of space, keeping the capital’s offices an attractive asset class. With the fundamentals proving strong, investment activity is expected to resume quickly once Brexit becomes clearer. Avison Young has already reported that £850 million worth of transactions were exchanged in the first 3 weeks of July alone, showing the confidence in the market.
At Foundation Recruitment we have seen a real influx of roles within the London Real Estate market, our partners are growing their teams, continuing to invest, develop and expand portfolios. All reports suggest London will remain a top city within the commercial property market and continue to defy the concerns surrounding Brexit.