City Office:
Market Watch

City Office Market Watch
City Office Market Watch

26 April 2017, words by Ben Raywood

City appears in good shape with above average take-up, low vacancy rate and stable rents

Supply and demand snapshot

■ Take-up for March was 818,507 sq ft, bringing total take-up for 2017 to 1,485,465 sq ft, which is 11% down on this point last year, but 18% up on the long-term average for the first quarter. 78% of the transactions were of a Grade A standard.

■ The 12-month rolling take-up at the end of March was 5.7m sq ft, which is 14% up on the long-term average.

 

TABLE 1

Key March stats

 
Table 1

Source: Savills Research

GRAPH 1

City take-up by quarter

 
Graph 1

Source: Savills Research – data accurate to end of Feb 2017

■ A notable transaction to complete in March saw Expedia acquire 136,657 sq ft at the Angel Building, EC1. They were already occupying part of the building and with Cancer Research announcing their desire to vacate, this allowed them to expand within the building. Cancer Research are taking circa 100,000 sq ft at the International Quarter in Stratford.

■ Another notable deal from March saw Amazon commit to their remaining option space at Principal Place, E1. The online retailer have taken 89,343 sq ft across parts of the first four floors. Also, DLA Piper exercised their options to acquire a further 40,390 sq ft in 160 Aldersgate, EC1.

■ At the end of March, the Professional services sector accounted for the greatest proportion of take-up at 24%. This is followed by the Retail & Leisure sector at 17%, the Tech & Media sector at 16%, and the Insurance & Financial services sector at 7%.

GRAPH 2

City take-up by business sector

 
Graph 2

Source: Savills Research

 There has been 785,924 sq ft of take-up in the City fringes compared with 702,564 sq ft in the core, showing that demand for fringe locations is still very much alive.

■ Total City supply stood at 6.9m sq ft at the end of March, equating to a vacancy rate of 5.5%, up on this point last year by 110 bps, however still down on the 10-year average by 110bps.

■ A total of 105,178 sq ft went under offer in March, bringing total space under-offer to 0.97m sq ft, which is 26% down on the long term average.

g At the end of Q1, the average prime rent in the City is £72.08/sq ft, which is down on 2016 by 7%, but up by 18% on the 10-year average.

■ The average grade A rent at the end of Q1 is £60.59/sq ft, which has fallen by 1% on 2016, but up by 23% on the 10-year average.

■ The average months rent free on a 10-year lease has risen from 20 in Q4 2016 to 22 for Q1 2017, which is the highest it has been since Q3 2013.

■ Total City & Central London demand is 8.2m sq ft, which is 6% down on the long-term average.


Analysis close up

TABLE 2

Monthly take-up

 
Table 2

TABLE 3

Year-to-date take-up

 
Table 3

TABLE 4

Rents

 
Table 4

TABLE 5

Supply

 
Table 5

TABLE 6

Development pipeline

 
Table 6

TABLE 7

Demand & under offers

 
Table 7

Demand figures include central London requirements

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 10 years with no breaks for preceding three months

N.B We have amended our historic stock figure, resulting in a slight change of our historic vacancy rates (Aug 2015)

TABLE 8

Significant March transactions

 
Table 8

TABLE 9

Significant supply

 
Table 9

MAP 1

Savills City Office Market Area (updated at the end of each quarter)

City 2017 Q1 stats

 
Map 1

Source: Savills Research

 
 

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Key contacts

Ben Raywood

Ben Raywood

Associate
Commercial Research

Savills Margaret Street

+44 (0) 20 7409 8791

 

Peter Thursfield

Peter Thursfield

Director
Central London

Savills Finsbury Circus House

+44 (0) 20 7409 8928

 

Josh Lamb

Josh Lamb

Associate Director
Central London

Savills Finsbury Circus House

+ 44 (0) 20 7409 8891