By Paul Norman Co-Star - Wednesday, January 21, 2015 12:34
London's Victoria enjoyed record levels of investment transactions and office take-up in 2014, reports Tuckerman.
Investment in Victoria almost doubled from £800m in 2013 to £1.5bn in 2014, with the Abu Dhabi Financial Group’s acquisition of New Scotland Yard for £370m and London Global’s purchase of 123 Buckingham Palace Road for £195m the standout transactions. The average deal size also doubled from £32m in 2013 to £66m in 2014.
A total of 881,993 sq ft of offices was let in 2014, representing an increase of 12.5% on last year. Tuckerman said it was the leasing agent on over a third of the total space let in the market last year, responsible for over a half (53%) of the 123 leasing transactions completed in Victoria last year.
For lettings of over 10,000 sq ft, almost half of all new tenants relocated from outside Victoria, although two thirds of the new stock of this size was taken by existing Victoria tenants, demonstrating the appetite among occupiers to remain in the Victoria, as well as a readiness to meet rents at the higher end of the market.
Of the four largest lettings (accounting for 270,000 sq ft between them – almost a third of all take up) all were to existing Victoria tenants.
The average demise size let has risen noticeably from the long term average of around 4,000 sq ft to 7,170 sq ft. Even stripping out the largest three deals of 60,000 plus, the average demise equates to over 5,405 sq ft, arising from both a sharp fall in availability within the sub-5,000 bracket as well as strong take up at top end of the market.
Availability of office space has more than halved from 750,000 sq ft at the start of 2014, to the current levels of 313,000 sq ft. However, the average floor plate size in Victoria has risen from almost 4,200 sq ft to 5,200 sq ft, a trend which is set to continue as the major developments such as Land Securities’ Zig Zag and Nova schemes come on line and the smaller size brackets are eroded through the loss of smaller buildings to residential, reports Tuckerman.
This squeeze on the sub-2,000 sq ft and 2,000 to 5,000 sq ft bracket of quality office stock, with a trend for conversion of space from office to residential is seeing no sign of abating, Tuckerman said.
Mark Fisher, Managing Director of Tuckerman, said: "The renaissance of Victoria, with the Land Securities Nova and Zig Zag schemes acting as a catalyst, is driving up rental value and transforming the area into one of central London’s most exciting markets. No longer perceived as the preserve of government and the civil service, Victoria is emerging as an vibrant destination with a compelling mix of retail, leisure and office facilities, supported by excellent transport links.
"This research highlights the loyalty of many existing occupiers towards Victoria, demonstrated by the volume prepared to pay a premium to remain in the area. This exemplifies our long-held belief in Victoria as an incubator location, enabling firms to thrive and grow without the need to relocate. Availability of small to medium sized stock is critical to enable the area to preserve its diversity as the market matures, and give businesses of all shapes and sizes the opportunity to call Victoria home.
"We envisage further loss of commercial stock to hotel and residential this year. Larger investment sales will also dominate the market as the institutions continue to move back into the Victoria market, encouraged by the increasing rents and infrastructure schemes reaching completion."