The Covid-19 pandemic has taken its toll on the London property market. Investment deals in London’s office sector fell to £595 million (€660 million) in the second quarter according to consultant Knight Frank. The firm said that this represents a £2 billion (€2.2 billion) fall when compared to Q1 and is substantially down on the historic quarterly average of £3.4 billion (€3.8 bn).
Lettings were also dramatically affected. The second quarter saw just 1.26 million sq ft (117,000 sq m) let which was the lowest quarterly figure in KF’s 30 year series. It was marginally worse than the weakest point during the GFC, the firm said in its quarterly London Office Market Report.
Total active requirements were 8.14 million sq ft (756,231 sq m), down 12% to compared to the first quarter. This is the first time in three years that demand has fallen below the long term average of 8.56 million sq ft (795,250 sq m).
KF said that 136 deals took place in Q2, of which 80 were for less than 5,000 sq ft (464 sq m) of space. Deals in the 10,000 sq ft to 20,000 sq ft (929 to 1,858 sq m)range fell the most, by 57%.
BP’s Canary Wharf letting is largest
BP’s pre-letting of 204,000 sq ft (18,952 sq m) at Cargo, Canary Wharf, was the largest letting of the quarter and the only deal over 100,000 sq ft (9,290 sq m).
Despite the grim letting figures, KF says prime headline annual rents are stable at £115 per sq ft (€1,378 per sq m) in the West End, £72.50 (€866 per sq m) in the City and £52.50 (€624 per sq m) in Docklands.
However, longer rent free periods are being granted and have increased by about three months on a 10-year lease in most sub markets. Typically, a tenant can expect to get 24 to 27 months rent free.