6 July, 2021

Available office space in Central London has been on an upwards trajectory since the beginning of the pandemic. At the end of 2019 availability was 12.6m sq ft. By the end of 2020 total availability had increased 85% to 23.1m sq ft. This has continued into the first half of 2021, with supply the highest on record since 2004 at the end of May, surpassing both the dot.com crisis and GFC to stand at 26.4m sq ft.

The majority of the increase in supply has been caused by sub-let availability. Of the 20.3m sq ft of secondhand space available, tenant-controlled space currently accounts for almost 8.7m sq ft (43%), placing it 111% above the five-year quarterly average.

However, there is evidence to suggest this trend has slowed. Tenant space being newly released on the market has remained high since the beginning of the pandemic. New additions to sub-let availability rose from 180,000 sq ft in May 2020 to 773,000 sq ft the following month. While this slowed over the summer period, restrictions and further lockdowns resulted in tenant-controlled space continually coming on to the market in large volumes.

At the end of January 2021, almost 500,000 sq ft of sub-let space was added to the availability figures. Since then, it has been on a downwards trajectory with just 40,000 sq ft added in May, 77% less than the same period in 2020. This suggests that the rate at which tenants are putting their space onto the market has slowed considerably.

In addition to this, sub-let space is being increasingly withdrawn from the market. More than 500,000 sq ft of sub-let space withdrawn so far in 2021, more than half of which was withdrawn in the last two months.

It is notable that withdrawals are now outpacing new additions to sub-let availability by a rate of more than 2:1. In the last two months less than 100,000 sq ft of tenant space has been added to the market while almost 250,000 sq ft has been withdrawn.

Whether this is a temporary phenomenon, or the start of a trend remains to be seen. Many occupiers are expected to return to their offices in September, at which point they are likely to reassess their occupational strategies. This could lead to the release of more space, but the anticipated return to more normal levels of leasing activity expected towards the end of the year should see absorption rates increase.

Figure 1: Newly placed Tenant Controlled Supply, month-on-month v Tenant Controlled Withdrawals

Will-the-recent-falls-in-sub-let-availability-continue graph

Source: CBRE Research, May 2021