Source: Savills Research
2016 was a year of highs and lows but ended with 5.8m sq ft being transacted
Supply and demand snapshot
■ Take-up for December was 823,510 sq ft, bringing the year-to-date City total to 5.8m sq ft, which is 21% down on 2015 but 6% up on the long-term annual average. 80% of all transactions to date have been of a Grade A standard.
■ A notable transaction to complete in the City in December was The FT's acquisition of Bracken House, 1 Friday Street, EC4. The 187,000 sq ft building was let on confidential terms from Obayashi.
![Table 1](http://research.euro.savills.co.uk/_images/table1(61).png)
TABLE 1Key December stats
■ Another large pre-let deal in December was at 20 Old Bailey, EC4. Barings Bank acquired the LG and floors 5 - 9 (109,050 sq ft) on confidential terms from Blackstone.
■ The Insurance & Financial services sector accounted for the majority of take-up in 2016 at 20%, followed by the Tech & Media sector at 16%, then the Serviced Office Provider sector at 11%, along with Professional services at 10%. Moreover, it is encouraging to see take-up from the Banking sector at 10% last year, up from 8% in 2015.
■ WeWork alone accounted for 342,450 sq ft across 6 deals in the City in 2016 and 546,549 sq ft across 7 deals in 2015, making them the tenant who acquired the most space in the City in both 2016 and 2015.
![Graph 1](http://research.euro.savills.co.uk/_images/graph1(78).png)
GRAPH 1City take-up by quarter
Source: Savills Research
■ Total City supply stood at 7.1m sq ft, equating to a vacancy rate of 5.7%, up on this point last year by 120 bps, however still down on the 10-year average by 90bps.
■ Total space under-offer is currently at 0.8m sq ft, which is down on the longterm average by 40%. The fall in space currently under-offer is largely due to the high take-up in December, which saw a number of big deals pushed through before the year-end.
■ The average prime rent for Q4 was £77.50/sq ft, up on Q4 2015 by 11.5%. g The average grade A rent for Q4 was £63.10/sq ft, up on Q4 2015 by 9.2%.
■ The average months given rent free on a 10-year lease was 20 for Q4 2016.
■ Total City & Central London demand is at 9m sq ft of requirements, which is 4% up on both the 12-month and long-term averages.
■ We are expecting a total of 4.8m sq ft of new developments and refurbishments to be brought to the market in 2017. However, 50% of this space is already pre-let, leaving just 2.4m sq ft of speculative space.
■ In fact, 31% of the 2017–2020 pipeline is already pre-let, with an annual average of speculative completions at 2.5m sq ft.
![Graph 2](http://research.euro.savills.co.uk/_images/graph2(76).png)
GRAPH 2City rents
Source: Savills Research
■ We expect Q1 2017 will see take-up at subdued levels while clarity regarding the UK's exit from the EU emerges. However, the lack of supply should ensure that there is only a gentle rise in vacancy rates and therefore headline rents should remain stable.
Analysis close up
![Table 2](http://research.euro.savills.co.uk/_images/table2(29).png)
TABLE 2Monthly take-up
![Table 3](http://research.euro.savills.co.uk/_images/table3(27).png)
TABLE 3Year-to-date take-up
![Table 4](http://research.euro.savills.co.uk/_images/table4(20).png)
TABLE 4Rents
![Table 5](http://research.euro.savills.co.uk/_images/table5(21).png)
TABLE 5Supply
![Table 6](http://research.euro.savills.co.uk/_images/table6(21).png)
TABLE 6Development pipeline
![Table 7](http://research.euro.savills.co.uk/_images/table7(21).png)
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](http://research.euro.savills.co.uk/_images/table8(23).png)
TABLE 8Significant December transactions
![Table 9](http://research.euro.savills.co.uk/_images/table9(11).png)
TABLE 9Significant supply
![Map 1](http://research.euro.savills.co.uk/_images/map1(31).png)
MAP 1Savills City Office Market Area (updated at the end of each quarter)
Source: Savills Research