West End Office:
Market Watch

West End Office Market Watch
West End Office Market Watch

25 January 2017, words by David Garland

Total annual take-up exceeds the 10-year average for the fourth consecutive year

Supply and demand snapshot

■ 285,246 sq ft of take-up was recorded in December across 39 transactions. This brought total annual take-up in the West End in 2016 to 3.97m sq ft, 9% below the 4.34m sq ft of take-up recorded in 2015 but 7% above the 10-year (2006–2015) annual average (see Graph 1 below).

■ A notable transaction to complete in December was Capula's acquisition of floors 2, 3 and 6 (23,691 sq ft) at British Land's 7 Clarges Street. The investment management firm signed a 10-year lease and are believed to be paying a rent of £107.50 per sq ft for floors 2 and 3 and in excess of £120 per sq ft floor floor 6.

 

TABLE 1

Key December stats

 
Table 1

Source: Savills Research

GRAPH 1

West End take-up

 
Graph 1

Source: Savills Research

■ Elsewhere, Scottish tech 'unicorn' Skyscanner pre-let floors 5-7 (23,809 sq ft) at Exemplar and Ashby Capital's The Avenue, 1 Bedford Avenue, WC1 with the terms confidential. 59,439 sq ft now remains at the development, with the works set to complete in March.

■ Tech & Media firms continue to be the driving force of take-up in the West End and have now been the most active business sector for the eighth consecutive year, accounting for 35% of take-up in 2016. Notable firms from the sector to have acquired space in 2016 include Apple, Palantir and Snapchat. The Insurance & Financial Services sector was the second most active in the West End in 2016, accounting for 14% of total take-up, closely followed by the Retail & Leisure sector at 13%.

■ 34% (1.34m sq ft) of 2016's take-up was space pre-let before completion.

■ Supply rose 14% from 4.18m sq ft at the end of November to 4.75m sq ft at the end of December, equating to a vacancy rate of 3.9%, its highest level since October 2013. The vacancy rate still remains below the 10- year average of 4.3%. 80% of current supply is of a Grade A standard, while only 15% is tenant controlled space.

■ The sharp increase in supply is due to the 699,000 sq ft of speculative developments and refurbishments due to complete in Q2 2017 being added to the supply pipeline.

■ The upward pressure on the vacancy rate should ease over the next two quarters with just 222,000 sq ft of speculative completions scheduled for the second half of 2017, however we are anticipating an increase in the amount of tenant release space being brought to the market.

■ Of the 2.30m sq ft of developments and extensive refurbishments set to complete in the West End in 2017, 1.12m sq ft (49%) has already been pre-let.

■ 520,121 sq ft is currently under-offer in the West End, 16% below the 10-year average, of which 154,476 sq ft went under-offer in December.

■ The average prime rent in the West End in 2016 was £110.41 per sq ft, 3% above 2015's average prime rent of £106.98 per sq ft. Similarly, the average Grade A rent rose 6% from £73.07 per sq ft in 2015 to £77.25 per sq ft in 2016 (see Graph 2 below).

GRAPH 2

West End rents

 
Graph 2

Source: Savills Research

■ We are currently tracking 4.69m sq ft of West End and Central London requirements.


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 December 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