A snapshot of supply and demand in the City

Following record levels of take-up achieved in 2014, January has started strongly, with take-up exceeding this point last year.

• Take-up for January started well with 610,709 sq ft being leased in 46 deals. It is clear that the strong leasing market seen throughout 2014 has continued apace as we begin 2015, with take-up 24% up on this time last year.

• The largest deal of the month was Hewlett-Packard's acquisition of the entire 1 Aldermanbury Square, EC2. The 65,572 sq ft building is of a grade A standard and had a quoting rent of £59.50 per sq ft from the landlord Epic.

• City supply is currently at 6.7m sq ft, of which 86% is of a grade A standard. This equates to a vacancy rate of 6.9%, which has slightly risen on last month (6.7%) due to the inclusion of the developments and refurbishments scheduled to arrive over the next six months. However, this should now begin to fall.

• We anticipate take-up to continue at this rate, especially as there is currently 2.1 million sq ft under-offer, which is 77% up on the long-term average. Furthermore, 844,036 sq ft of this space went under-offer in January alone.

• The drift of occupiers from West to East is certainly a trend that we foresee continuing during 2015. Rogers Stirk Harbour & Partners are the latest traditional West End occupier to make the journey eastwards, as they acquired the 14th floor of The Leadenhall Building, EC3 at a rent of £66.50 per sq ft.

• The highest rent achieved during January was £70 per sq ft at the Salesforce Tower, 110 Bishopsgate with Trailstone acquiring part of the 25th floor on a 3 year sub-lease. The average grade A rent for January was £50.70 per sq ft. We expect to see high rental growth of around 11-12% for both average prime and average grade A rents through the course of this year (Graph 1).

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• Interestingly, since the start of 2014, the most amount of space has been transacted within the £50 - £59.99 per sq ft rent bracket. Whereas during 2007, the majority of space was leased within the £40 - £49.99 per sq ft bracket.

• Take-up from serviced office providers has continued with i2 Office Ltd taking the second floor of 75 King William Street, EC4. The serviced office provider WeWork are currently under-offer for 166,619 sq ft of space at Moorgate Exchange, EC2. We expect this sector to remain active in the City leasing market.

• There is only 985,000 sq ft of speculative space scheduled to arrive during 2015. Even though there is a substantial 3.6m sq ft of speculative space due to arrive during 2016, we anticipate much of this will be pre-let this year due to the falling level of current supply (Graph 2).