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City Office Market Watch - September 2015

Research Article

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Big rents in August result in the highest City monthly average grade A figure ever.

■ Take-up for August was 738,680 sq ft in 43 transactions, bringing the year-to- date take-up to 5,243,126 sq ft, which is 11% up on this point last year. 86% of all transactions have been of a Grade A standard (Graph 1).

■ The majority of activity has occurred within EC2 this year, accounting for 28% (1.5m sq ft) of all City take-up.

■ However, the City Fringe has still accounted for 41% of total take-up this year, which is up on the 10-year average of 31%.

■ The largest deal of the month was the acquisition of a total of 241,925 sq ft at the Aldwych Quarter, which included Bush House (107,503 sq ft), Strand House (78,373 sq ft), and King House (56,049 sq ft) taken by King's College London from Kato Chemicals.

Graph 1

GRAPH 1City take-up by quarter

Source: Savills Research

■ Another notable deal was the acquisition of Fox Court, 14 Gray's Inn Road, WC1 (69,807 sq ft) by serviced office provider WeWork on a 20-year lease at £58.20/sq ft.

■ So far this year, the Professional sector has accounted for 22% of total take-up, Business & Consumer services 18%, and Insurance & Financial services 17%, with the Banking sector accounting for 6%. Tech & Media occupiers have accounted for a total of 13%.

■ Total supply at the end of August stood at 5.6m sq ft producing a vacancy rate of 5.3%. However, there is currently 1.5m sq ft of space currently under-offer (Graph 2).

Graph 2

GRAPH 2City average grade A rent and vacancy

Source: Savills Research

■ 53% of current supply is situated within the City Core, with EC2 accounting for 28% of total supply. 87% of current City supply is grade A, therefore only 13% is for cheaper grade B space.

■ The top rent achieved in the City in August was at The Shard, which saw Leonteq Securities taking the 26th floor (15,912 sq ft) at £90/sq ft on a straight 10-year lease.

■ The average grade A rent for August was £61.94/sq ft, which is the highest monthly average grade A figure ever for the City as a whole (Graph 2).

Table 1

TABLE 1Key August stats

Source: Savills Research 

 

Analysis close up

Table 2

TABLE 2Monthly take-up

Table 3

TABLE 3Year-to-date take-up

Table 4

TABLE 4Rents

Table 5

TABLE 5Supply

Table 6

TABLE 6Development pipeline

Table 7

TABLE 7Demand & under offers

Completions due in the next six months are included in the supply figures

*Average prime rents for preceeding three months

** average rent free on leases of 10 years for preceeding three months

Table 8

TABLE 8Significant August transactions

Table 9

TABLE 9Significant supply

Map 1

MAP 1Savills City Office Market Area