City Office:
Market Watch

City Office Market Watch
City Office Market Watch

29 June 2017, words by Ben Raywood

Take-up slightly up on this point last year, with the Tech & Media sector being the most active

Supply and demand snapshot

■ Take-up for May was 292,764 sq ft, bringing total take-up for 2017 to 2,246,492 sq ft, which is 2% up on this point last year. 84% of transactions to-date have been of a Grade A standard.

■ The 12-month rolling take-up at the end of May was 5.9m sq ft, which is 19% up on the long-term average.

 

TABLE 1

Key May stats

 
Table 1

Source: Savills Research

GRAPH 1

City take-up by business sector

 
Graph 1

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

■ A notable transaction to complete in May saw Industrial Light & Magic acquire 47,010 sq ft at Lacon House, Theobalds Road, WC1. The Walt Disney owned visual effects company took the space on confidential terms, and join other Tech & Media companies already in the building, Argus and Exterion Media. The Blackstone property is now 82% let.

■ Also in May, Man Group acquired 41,000 sq ft on the 5th floor of 1 Angel Lane, EC4. The investment management company took the space on a lease until 2029 at £62.00/sq ft with 27 months rent free.

■ At the end of May, the Tech & Media sector accounted for the greatest proportion of take-up at 20%. This is followed by the Professional services sector at 17%, and the Insurance & Financial services sector at 14%.

■ The Tech & Media sector have accounted for 517,069 sq ft of take-up to the end of May this year. This is the largest amount of take-up from this sector in the first five months of the year ever.

■ Total City supply stood at 6.7m sq ft at the end of May, equating to a vacancy rate of 5.4%, up on this point last year by 90 bps, however still down on the 10-year average by 130bps. We do expect the vacancy rate to rise to over 6% next month as all schemes scheduled to complete in Q4 will be added to the figures.

■ A total of 524,182 sq ft went under-offer in May, which is nearly double the 12-month average. This brings total space under-offer to 1.3m sq ft, which is 4% up on the long term average.

■ The average Grade A rent for 2017 so far for the city core is £61.90/sq ft, which is only 1% down on last year. Similarly, in the fringe areas the average Grade A rent for 2017 is £59.17/sq ft, which is also only 1% down on last year.

GRAPH 2

City core & fringe average Grade A rent

 
Gjavascript:;raph 2

Source: Savills Research - data accurate to end of May 2017

■ Total City & Central London demand is 9.5m sq ft, which is 9% up on the long-term average, and 3% up on the 12-month 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 May 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