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City Office Market Watch – April 2016

Research Article

Contacts & Related Articles

Take-up down on last year, but still significantly up on the average

■ Take-up for March was 843,642 sq ft, bringing the City total at the end of Q1 to 1.7m sq ft, which is 15% down on this point last year. However, it is still 35% up on the long-term average amount for Q1.

■ 82% of all March transactions were of a Grade A standard.

■ This has brought the 12-month rolling take-up figure to 7.1m sq ft, which is still 46% up on the long-term average.

Table 1

TABLE 1Key March stats

Source: Savills Research

■ There has been 134 transactions in Q1 this year, compared with 138 last year in the first quarter.

■ The largest deal of the month was the acquisition of 149,925 sq ft at 30 Gresham Street, EC2 by Investec on an assignment of CommerzBank's lease. They took the space on an average rent of £60.87/sq ft, on a 12 year lease with 34 months rent free.

■ Another notable deal was the acquisition of floors 11 - 15 (118,092 sq ft) at 100 Bishopsgate, EC3 by Jefferies. The Brookfield scheme, which is scheduled for delivery in Q4 2018 is now 47% let.

■ In Q1, Insurance & Financial services have accounted for the greatest amount of take-up accounting for 27%. They are followed by Tech & Media (12%), Retail & Leisure (12%), and Professional (11%).

Graph 1

GRAPH 1City take-up

Source: Savills Research

■ Total City supply stood at 5.4m sq ft, equating to a vacancy rate of 4.4%, down on this point last year by 0.9%.

■ There is currently 1.19m sq ft of space under-offer in the City, which is 9% down on the long-term average and 42% down on this point last year. Of this, 115.129 sq ft went under-offer in March alone, which is the smallest monthly amount since August 2012.

■ 36C (3,087 sq ft) at Tower 42, EC2. They took the space on a five-year lease with three months rent free.

■ The average Grade A rent for Q1 was £60.80/sq ft, which is the highest quarterly average grade A rent since records began in the City.

■ The average prime rent (average of top 10% of deals) for Q1 was £78.13/sq ft, however if we omit tower deals it falls to £71.70/sq ft

■ As occupiers, especially from the Media & Tech sectors, have been drawn to Fringe locations, the increase in demand has resulted in a significant increase in rents. The gap in average grade A rents between the core and the fringe has closed from £10 in 2012 to £2.18 in Q1 2016.

■ We are currently tracking 16.5m sq ft of refurbishments and developments due to arrive to the market between now and the end of 2019, of which 27% is already pre-let.

Graph 2

GRAPH 2City rents

Source: Savills Research

 

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 preceding three months

** Average rent free on leases of 10 years with no breaks for preceding 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 March transactions

Table 9

TABLE 9Significant supply

Map 1

MAP 1Savills City Office Market Area (updated at the end of each quarter)

Source: Savills Research