Take-up 30% above the 10 year average at the end of Q2

Supply and demand snapshot

■ 760,026 sq ft of take-up was recorded in June across 46 transactions. This was the highest monthly take-up total since 999,120 sq ft was recorded in January 2013.

■ June's take-up brought total 2017 take-up at the end of Q2 to 2.4m sq ft, 28% above this point in 2016 and 30% above the 10-year average.

TABLE 1Key June stats

■ Much of June's take-up relates to two acquisitions by WeWork at two Almacantar properties. This first saw them pre-let the entire 284,992 sq ft at Two Southbank Place, SE1. The development is due to complete in Q3 2018. The second transaction saw WeWork take 140,000 sq ft at 125 Shaftesbury Avenue, WC2. WeWork will undertake a complete refurbishment of the property before looking to secure occupiers.

■ Boosted by these transactions, the Serviced Office Provider sector was the most active in the West End in H1, accounting for 27% of take-up. The Tech & Media sector was the second most active at 25% and the Insurance & Financial Services sector next at 13% (Graph 1).

^{Source: Savills Research}

GRAPH 1West End take-up by business sector

^{Source: Savills Research}

■ So far this year, Covent Garden has been the most active sub-market with 569,958 sq ft of take-up. This is followed by NOX (E) with 436,627 sq ft and Southbank (W) with 295,922 sq ft (Graph 2).

GRAPH 2West End sub-market take-up

^{Source: Savills Research}

■ Total West End supply at the end of June stood at 4.97m sq ft, equating to a vacancy rate of 4.1%. This is 90bps above the same point in 2016. 74% of current supply is of a Grade A standard while 27% is tenant controlled.

■ The highest recorded rent in June was £135.00 per sq ft. The transaction saw Onyx acquire the 3rd floor at 8 St James's Square, SW1 totalling 11,055 sq ft on a 10-year lease.

■ The average prime rent in Q2 2017 was £114.06 per sq ft, 3% above 2016's average prime rent of £110.41 per sq ft.

■ The average Grade A rent at the end of Q2 was £82.36 per sq ft, 7% above 2016's average Grade A rent of £77.25 per sq ft.

■ While we have seen strong headline rental levels, tenant incentives continue to increase. The average rent free period on a straight 10-year lease has moved out to 20 months at the end of Q2 2017, compared to the average of 16 months in 2016.

■ Following WeWork's pre-let at Two Southbank Place, 41% of the 2.27m sq ft of development and refurbishment completions scheduled for 2018 has already been pre-let.