West End Office:
Market Watch

West End Office Market Watch
West End Office Market Watch

21 December 2016, words by David Garland

2016 take-up set to be just short of 4m sq ft

Supply and demand snapshot

■ 279,071 sq ft of take-up was recorded in November across 28 transactions. This brought the year-to-date total to 3.68m sq ft, 7% below the same point in 2015 but 14% above the 10-year average.

■ November's take-up has brought the 12-month rolling take-up figure to 4.07m sq ft, 17% above the long-term average.

 

TABLE 1

Key November stats

 
Table 1

Source: Savills Research

■ Great Portland Estates let the 2nd (14,624 sq ft) and 5th (10,587 sq ft) floors at 30 Broadwick Street, W1 to The Boston Consulting Group (BCG) and Jagex respectively, with both tenants signing 10-year leases. BCG are paying a rent of £88.50 per sq ft, while Jagex are paying £107.50 per sq ft, a record rent for Soho.

■ Elsewhere, Airwair International which operates the Dr Martens brand, acquired 23,470 sq ft at Camden Wharf, NW1. The site will be used as Dr Martens new headquarters with the retailer signing a 10-year lease at a rent of £59.50 per sq ft.

■ We have seen a significant increase in activity from the Retail & Leisure firms in 2016, with the sector accounting for 12% of year-to-date take-up compared to just 5% in 2015.

GRAPH 1

Take-up by size band – 2016

 
Graph 1

Source: Savills Research

■ Supply rose slightly from 4.16m sq ft at the end of October to 4.17m sq ft at the end of November. This has resulted in the vacancy rate rising to 3.5%, however, this is still considerably below the 10-year average vacancy rate of 4.3%. 76% of current supply is of a Grade A standard, while 18% is tenant release space.

■ Looking forward, 46% of 2017's development pipeline has already been pre-let, leaving just 1.3m sq ft of speculative completions.

■ Encouragingly, 301,849 sq ft went under offer in November, the highest monthly total of the year. This has bought the total amount of space under-offer to 606,050 sq ft which is in line with the 10-year average.

■ 2016 total annual take-up in the West End is on course to be just below 4m sq ft, considerably above the 10-year average annual take-up level of 3.6m sq ft (Graph 2).

GRAPH 2

Supply

 
Graph 2

Source: Savills Research

■ In a year beset by political and economic shocks, the relatively high level of take-up in 2016 demonstrates the strength and diversity of the West End office market. Although uncertainty is set to persist throughout 2017, both supply and speculative development are still relatively limited. Provided there is no flood of tenant release space to the market, vacancy rates should remain relatively low compared to the long-term average, protecting rental levels.


Analysis close up

TABLE 2

Take-up

 
Table 2

TABLE 3

Supply

 
Table 3

TABLE 4

Rents

 
Table 4

TABLE 5

Demand & Under Offers

 
Table 5

TABLE 6

Development pipeline

 
Table 6

Completions due in the next six months are included in the supply figures

* Average prime rents for preceding three months

** Average rent free on leases of five years for preceding three months

TABLE 7

Significant November transactions

 
Table 7

TABLE 8

Significant supply

 
Table 8

MAP 1

Savills West End Office Submarkets

 
Map 1
 
 

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Key contacts

David Garland

David Garland

Research Analyst
Commercial Research

Savills Margaret Street

+44 (0) 20 7016 3832