The Docklands market is certainly benefitting alongside the City with 
the improving market conditions as total take-up for the half reached 690,000 sq ft. This is a massive 275% increase on the same period last year and an 8% increase on the total amount of space taken across the whole of last year. The large amount of take-up certainly followed on from the second half of 2013 where 500,000 sq ft was transacted.

The large amount of take-up has been primarily due to the following large deals: EY’s acquisition of 207,000 sq ft at 25 Churchill Place, E14, GDF Suez Energy’s acquisition of 62,000 sq ft at 25 Canada Sq, E14, and EBA’s acquisition of 58,000 sq ft with HS2’s acquisition of 55,000 sq ft both at 1 Canada Square, E14.

Total availability at the end of the first half of this year stood at 1.3 million sq ft for the entire Docklands area. Total availability for the Docklands core is currently at 882,000 sq ft, giving a vacancy rate of 5.5%. Currently, it is 5 Churchill Place, E14 that has the most amount of available space at 320,000 sq ft with a quoting rent of mid to late £30's per sq ft. This building has actually been shortlisted by Societe Generale as a potential place for a new headquarters.

The largest asset currently on 
the market in the Docklands, and indeed the whole of Central London is the HSBC Tower, E14 in Canary Wharf for £1.1 billion, 4.86% and £1,007 per sq ft.

As previously predicted, the Docklands market is becoming increasingly more attractive to occupiers who are more footloose or looking to capitalise on the lower rents. For instance, the Ministry of Justice took 33,000 sq ft at 11 Westferry, E14 for £30 per sq ft, and Interoute Communications, a technology firm, took 30,000 sq ft at 25 Canada Sq, E14 for £35 per sq ft. This is roughly £15 cheaper per sq ft than in the City for accommodation of a similar specification.

Rents

The rents in the Docklands may be cheaper than the City at the moment, but this market is also starting to experience upward rental growth. 
The average rent for the first half of this year was £35.92 per sq ft, a 15% increase on the average rent at the end of 1H 2013 (£31.22 per sq ft), and a 7% rise on the average rent across the whole of 2013. Furthermore, this half saw the highest rent achieved in the Docklands since 2007 at 25 Churchill Place, E14 by EY when they committed to a rent of £48.50 per sq ft.

We foresee the average rent for a single Tower floor in the Docklands to rise to £45 per sq ft by 2017.

Outlook

Overall, the outlook for the Docklands is a positive one with increased take-up, rents and demand all forecasted for the next 12 months. The market provides occupiers from all different sectors with a cheaper alternative to the more traditional City core. However, this market may also become increasingly threatened by the emerging market at Stratford City. We have already seen TFL pull out of a deal at 10 Upper Bank Street, E14 for another building in Stratford City due to failing to achieve board approval for the Docklands.

The gap between City of London office rents and those in the Docklands remains wider than normal, and we expect this gap to close gradually over the next five years.

Taken from
Review and Outlook: Central London Offices - September 2014