West End Office:
Market Watch

West End Office Market Watch
West End Office Market Watch

26 April 2017, words by David Garland

A positive Q1 sees strong take-up and the vacancy rate remain stable

Supply and demand snapshot

■ 343,806 sq ft of take-up was recorded in March across 44 transactions. This brought total Q1 2017 take-up to 1.05m sq ft, 1% above this point in 2016 and 10% above the 10-year average (see Graph 1 below).

 

TABLE 1

Key March stats

 
Table 1

Source: Savills Research

GRAPH 1

West End take-up by quarter

 
Graph 1

Source: Savills Research

■ March saw the first transaction complete at Aberdeen Asset Management's 12 Hammersmith Grove, W6. Medidata acquired the top 9th and 10th floors totalling 29,106 sq ft, at a sub-market equalling rent of £59.00 per sq ft.

■ Elsewhere, Conde Nast Publications acquired the 9th floor totalling 26,836 sq ft at The Adelphi, WC2 on a 10-year lease at a rent of £79.50.

■ The Tech & Media sector was the most active in the West End in Q1 2017, accounting for 22% of take-up, followed by the Professional Services sector (19%) and the Insurance & Financial Services sector (16%).

■ Supply has remained fairly stable in the West End so far in 2017, standing at 4.63m sq ft at the end of Q1. This equates to a vacancy rate of 3.8%, its third month at this level.

■ 545,965 sq ft is currently under-offer in the West End, 9% below the longterm average. 215,897 sq ft of this went under-offer in March.

■ A West End record rent of £190.00 per sq ft was achieved in March at 5 St James's Square. The transaction saw Canadian billionaire Lawrence Stroll's SHL acquire the part Ground and 1st floors totalling 4,000 sq ft on a 10-year lease.

GRAPH 2

West End rents

 
Graph 2

Source: Savills Research

■ Boosted by the transaction at 5 St James's Square, the average prime rent in Q1 2017 was £122.39 per sq ft, 11% above 2016's average Grade A rent of £110.41 per sq ft. Similarly, the average Grade A rent in Q1 2017 was £85.03 per sq ft,10% above 2016's average Grade A rent of £77.25 per sq ft.

■ However, omitting the transaction at 5 St James's Square, the Q1 average prime rent falls to £111.76 per sq ft and the average Grade A falls to £82.93 per sq ft.

■ While headline rents have held up in the West End, upward pressure continues to be exerted on the level of incentives being offered to tenants. The average rent free period on straight 10-year leases signed since the start of October 2016 is 19 months, compared with the average of 14 months in the previous six months


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

Demand figures include central London requirements

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 March 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