Snapshot of supply and demand in the City

Last year, take-up reached record levels in the City while rental growth continues to rise.

• Total City take-up for 2014 reached an all time record of 8.2m sq ft (Graph 1). This is 16% up on 2013, and 78% up on take-up for 2012, highlighting the dramatic growth in the occupational market.

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• Overall, 82% of take-up for 2014 was of a grade A standard, compared with 75% across 2013, showing an increase in preference for top quality space.

• There were a total of 547 deals in 2014 compared with 403 in 2013. Therefore, the average deal size has fallen from 17,566 sq ft for 2013 to 15,058 sq ft for 2014. It is clear the rise in take-up for 2014 has been a result of increased activity of small to medium sized deals. For example, there were an extra 121 deals below 15,000 sq ft in 2014 compared with 2013, resulting in an extra 722,929 sq ft of take-up.

• In comparison, 2013 saw 29 deals over 50,000 sq ft totalling 3.1m sq ft, whereas 2014 only saw 25 deals accounting for 2.8m sq ft.

• Furthermore, another reason behind the record amount of take-up for 2014 is the improving performance of the City Fringe, which accounted for 45% of take-up in 2014 compared with the long term average of 31%.

• For 2014, Insurance & Financial services and Business & Consumer services dominated take-up, accounting for 24% and 22% respectively. The TMT sector (16%) and the Professional services sector (14%) were also active. The Banking sector has shown significant growth, accounting for 4% of take-up for 2014 compared with just 1% across 2013.

• WeWork accounted for the largest December deal by taking 63,201 sq ft at 199 Bishopsgate, EC2. We expect to see continued strong take-up from serviced office operators this year.

• At the end of 2014, City supply was 6.4m sq ft giving a vacancy rate of 6.7% continuing the downward trend from Q3. Furthermore, the central London vacancy rate is also on a downward trend settling at 4.7% at year end, which is the lowest since 2007.

• There is currently 1.2m sq ft under-offer in the City, which is in line with the long term average.

• City top rent for 2014 was £83.50 psf achieved at The Leadenhall Building, EC3. This is a substantial rise from the top rent for 2013 (£70 psf). Furthermore, both average prime rent (£62.46 psf) and average grade A rent (£48.95 psf) have risen slightly on last year (Graph 2). We would expect this consistent rental growth to continue throughout 2015 as supply becomes increasingly more constrained.

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• There is a limited amount of new space scheduled to arrive in the City. In 2015, with only 2.3m sq ft due to be delivered, of which 52% is already pre-let leaving just 1.1m sq ft of speculative space. This will cause further downward pressure on the City vacancy rate.