West End Office:
Market Watch

West End Office Market Watch
West End Office Market Watch

30 May 2017, words by David Garland

Take-up remains above the long-term average but supply continues to slowly increase

Supply and demand snapshot

■ 205,249 sq ft of take-up was recorded in April across 35 transactions. This brought year-to-date take-up to 1.26m sq ft, 3% below this point in 2016 but 9% above the 10-year average.

■ 286,330 sq ft went under-offer in April, bringing total supply under-offer to 642,703 sq ft, which is 4% above the long-term average.

 

TABLE 1

Key April stats

 
Table 1

Source: Savills Research

■ Total West End supply stood at 4.87m sq ft at the end of April, equating to a vacancy rate of 4.0% its highest level since Q3 2013 and 90bps above the same point in 2016. However, the vacancy rate remains below the 10-year average of 4.2%.

■ The increase in availability is predominantly due to an increase in the amount of tenant controlled supply, moving out from 21% of total supply at the end of March to 26% at the end of May. Much of this increase relates to the addition of 148,063 sq ft at 5 Merchant Square, W2 which Marks & Spencer are looking to sub-let.

■ The largest transaction to complete in April saw China's biggest oil producer Petro China, acquire the part 5th (7,028 sq ft) and 11th (22,887 sq ft) floors at The Adelphi, WC2 totalling 29,915 sq ft. Petro China signed a 15-year lease paying a rent of £69.50 on the part 5th and £82.50 on the 11th.

■ As at the end of April, the Tech & Media sector continues to be the most active in the West End accounting for 21% of take-up, followed by the Insurance & Financial Services sector (17%) and the Professional Services sector (15%).

■ Serviced office providers have accounted for 8% of take-up so far this year. We expect the sector to continue to be highly active for the remainder of the year; serviced office providers are currently under-offer on 115,555 sq ft in four properties and several providers are actively pursuing expansion opportunities across the West End (Graph 1).

GRAPH 1

Serviced office provider take-up %

 
Graph 1

Source: Savills Research

■ The highest recorded rent in April was £120.00 per sq ft, the transaction saw Outside BDG acquire the 9th floor at Devonshire House, 1 Mayfair Place, W1 on a 10-year lease.

■ There has been 20 lettings with rents of £100.00 per sq ft or greater so far in 2017 which equates to 18% of all recorded, compared to 10 at the same point in 2016 which equated to 9%. The most common rent band that deals have fallen into so far in 2017 is £70–£79.99 (22%), followed by the £60–£69.99 rent band (20%) with the £100+ rent band third (Graph 2).

GRAPH 2

Number of deals by rent-band

 
Graph 2

Source: Savills Research

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 10 years for preceding three months

TABLE 7

Significant April transactions

 
Table 7

TABLE 8

Significant supply

 
Table 8

MAP 1

Savills West End office submarkets

 
Map 1
 
 

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