Publication

City Office Market Watch – February 2018

Research Article

Contacts & Related Articles

Two big pre-lets help keep the strong levels of demand continue into 2018

Supply and demand snapshot

■ The above average levels of demand seen in 2017 have carried over into 2018 with take-up for January being 434,273 sq ft, which is 58% up on last year and 24% up on the 10-year average for the first month of the year.

■ The 12-month rolling take-up reached 7.5m sq ft, which is the highest since September 2015 (Graph 1).

Table 1

TABLE 1Key January stats

Source: Savills Research

Graph 1

GRAPH 1City 12-month rolling take-up

Source: Savills Research 

■ We are expecting there to be an increase in the amount of sub-let space to the market this year. Eight out of the 28 transactions in January were either a sub-let or assignment and equated to 16% of total take-up.

■ A notable transaction to complete in January saw SMBC Nikko pre-let levels three to five (161,156 sq ft) at 100 Liverpool Street, EC2. The financial investment firm have pre-let the space with the British Land/GIC scheme scheduled to complete at the end of 2019.

■ Also in January, Mimecast pre-let 78,629 sq ft across levels three and four of 1 Finsbury Avenue, EC2. The technology firm is expected to move into the British Land/GIC scheme at the start of next year, where circa 150,000 sq ft remains available.

■ As a result of the two large pre-lets, the Insurance & Financial services sector has accounted for the greatest amount of take-up so far this year at 40%, followed by the Tech & Media sector at 26%. The Professional services sector is next accounting for 9%.

■ Total City supply stands at 7.0m sq ft at the end of January, equating to a vacancy rate of 5.6%, which is the same as this point last year and down on the 10-year average by 110 bps.

■ Strong demand has carried through into 2018 with a total of 478,644 sq ft going under-offer in January. This brings the total volume of space under-offer to 1.4m sq ft, 10% up on the long-term average (Graph 2).

Graph 2

GRAPH 2City under-offer amounts

Source: Savills Research

■ Following the increase in serviced office take-up, who largely target smaller occupiers, we have seen an increase in the number of small floorplates available. There are an additional 93 units, up from a total of 622, available now of less than 10,000 sq ft in the City compared to January 2017.

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

Demand figures include central London requirements

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 January transactions

Table 9

TABLE 9Significant supply

Map 1

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

Source: Savills Research