Publication

City Office Market Watch - October 2015

Research Article

Contacts & Related Articles

Take-up 6% down on last year, but expected to exceed 7m sq ft by year-end.

■  Take-up for September was 620,142 sq ft in 45 transactions, bringing the year-to-date take-up to 5,863,268 sq ft, which is 6% down on this point last year. 86% of all transactions have been of a Grade A standard (Graph 1).

■  The average figure for Q4 take-up is 1.4m sq ft, which, if achieved this year, would result in 2015 take-up exceeding 7m sq ft for the third year running.

■  The 12-month rolling take-up figure stood at 7.8m sq ft for the end of Q3, which is the lowest it has been since this point last year.

■  The largest deal of the month was the acquisition of the whole of Dawson House, 5 Jewry Street, EC3 (49,192 sq ft) by serviced office provider One Avenue Group.

Graph 1

GRAPH 1City take-up by quarter

Source: Savills Research

■  Another notable deal was the acquisition of the 3rd and 4th floors totalling 24,000 sq ft at 6 New Street Sq, EC4 by Blake Morgan. The law firm took the space on a seven year lease at an average rent of £53.64/sq ft.

■  At the end of Q3, the Professional sector has accounted for 21% of total take-up, Insurance & Financial services 18%, with the Banking sector accounting for 6% separately. Tech & Media occupiers have accounted for a total of 13%, and Serviced Office Providers 11%.

■  Total supply at the end of Q3 stood at 5.4m sq ft producing a vacancy rate of 4.4%. However, there is currently 1.1m sq ft of current space under-offer.

■  54% of current supply is situated within the City Core, with EC2 accounting for 29% of total supply. 86% of current City supply is grade A.

Graph 2

GRAPH 2City average grade A rent and vacancy

Source: Savills Research

■  At the end of Q3, the top rent achieved this year in the City is £90/sq ft at The Leadenhall Building, EC3. The average prime rent (avg of top 10% of deals) is £75.50/sq ft, the highest it has ever been.

■  Interestingly, out of all of the City submarkets, the Southbank has the highest average grade A rent for this year at just under £60/sq ft. However, this is largely due to the small number of grade A deals done here, of which The Shard accounts for just under 50%, and therefore heavily influencing the average rents.

■  The £40 - £49.99/sq ft rent band has historically accounted for the greatest number of transactions, except for this year, where we have seen the most deals being done in the £50 - £59.99/ sq ft band. Moreover, 2015 so far has seen the greatest number of deals being done over £70/sq ft.

■  We anticipate approximately 5.3m sq ft of new space to achieve PC next year in the City, of which 41% is already pre-let.

Table 1

TABLE 1Key September 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 with no breaks for preceeding 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

TABLE 8Significant September transactions

Table 9

TABLE 9Significant supply

Map 1

MAP 1Savills City Office Market Area

Source: Savills Research