City Office:
Market Watch

City Office Market Watch
City Office Market Watch

30 May 2017, words by Ben Raywood

Take-up in-line with this point last year and under-offers above the long-term average

Supply and demand snapshot

■ Take-up for April was 468,263 sq ft, bringing total take-up for 2017 to 1,953,728 sq ft, which is only 2% down on this point last year. 83% of transactions to-date have been of a Grade A standard.

■ The 12-month rolling take-up at the end of April was 5.8m sq ft, which is 17% up on the long-term average.

 

TABLE 1

Key April stats

 
Table 1

Source: Savills Research

GRAPH 1

City supply & vacancy rate

 
Graph 1

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

■ A notable transaction to complete in April saw NEX, formerly ICAP, acquire c110,000 sq ft at the London Fruit & Wool Exchange, E1 on a sub-lease from Ashurst.

■ Also in April, BUPA acquired 55,305 sq ft at the new development Angel Court, EC2 over levels 1, 2, and part 3. There were two further lettings here last month; NewTA acquiring 22,885 sq ft on level 5, and Shanghai Pudong Bank acquiring 8,760 sq ft on level 19, which achieved the record rent of the year so far at £81.50/sq ft on a 10-year lease with a break in the fifth year.

■ At the end of April, the Professional services sector accounted for the greatest proportion of take-up at 19%. This is followed by the Tech & Media sector at 15%, and the Insurance & Financial services sector at 14%.

■ Serviced office providers have continued to be active this year, accounting for 9% of take-up. This is over double the sector's 10-year average market share of 4%.

■ Total City supply stood at 6.9m sq ft at the end of April, equating to a vacancy rate of 5.6%, up on this point last year by 110 bps, however still down on the 10-year average by 110bps.

■ A total of 615,264 sq ft went under-offer in April, bringing total space under-offer to 1.4m sq ft, which is 5% up on the long-term average.

GRAPH 2

City supply pipeline

 
Graph 2

Source: Savills Research

■ Next year there is an estimated 5.2m sq ft of new space in the pipeline, however 49% of this space has already been pre-let leaving circa 2.7m sq ft scheduled to be delivered. However, we anticipate more pre-letting to occur which will assist in keeping the vacancy rate below the long-term average of 8.1%.

■ There have been seven deals over 50,000 sq ft so far this year, compared with just four by this point last year. However, take-up for smaller units has been slow with the number of deals for less than 10,000 sq ft 26% down on this point last year.

■ Total City & Central London demand is 9.5m sq ft, which is 9% up 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 April 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