Abstract
City keeps on surprising with a low and stable vacancy rate and early signs of rental growth
Supply and demand snapshot
■ Take-up for the month reached 438,908 sq ft across 26 transactions, with an average deal size of 16,881 sq ft.
■ This brings total take-up for 2018 to 1.8m sq ft, which is 10% down on this point last year, but 10% up on the 10-year average for the first four months of the year. The 12-month rolling take-up fell to 7.2m sq ft, which is still 22% up on this point last year.
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TABLE 1 | Key April stats
Source: Savills Research
■ A notable transaction to exchange in April saw Bryan Cave Leighton Paisner pre-let the whole (122,315 sq ft) of MED Holding's Governors House, 5 Laurence Pountney Hill, EC4.
■ Also in April, serviced office provider Spaces, which was bought by Regus back in 2015, took 40,107 sq ft across levels LG - 3 at The Epworth, 25 City Road, EC1. The space was let at an overall average of £60.00/sq ft. The new refurbishment is now fully let as NTT Data have previously acquired levels 4 - 6.
■ So far this year, the majority of take-up within the City has come from the three primary sectors. The Insurance & Financial services sector lead the way having accounted for 26%. The Professional services are close behind accounting for 22%, and the Tech & Media sector continue to take space accounting for 14%. The serviced office sector has only accounted for 7%, however we anticipate this to steadily increase over the next quarter as a number of centres are under-offer.
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GRAPH 1 | City take-up by business sector
Source: Savills Research
■ Total City supply stands at 7.4m sq ft at the end of April, equating to a vacancy rate of 5.8%, which is up on this point last year by 20bps, but in parallel with the five-year average.
■ The vacancy rate has not risen as much as we expected it would at the start of the year. This is a result of continued good levels of demand, and future schemes being pre-let. At the end of Q2, we will only be currently adding in approximately 160,000 sq ft of new space, of which over 100,000 sq ft is already under-offer.
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GRAPH 2 | City supply and vacancy rate
Source: Savills Research
■ The average Grade A rent for the whole City so far this year is £62.11/sq ft, which is 3.5% up on 2017. This is another trend that we were not expecting to see at the start of the year, although it is likely this will come down as the size of the data sample increases becoming less skewed by the outliers.
■ Demand ticked up this month as the amount of central London & City requirements increased from 8.4m sq ft last month to 9.2m sq ft at the end of April. This is 5% up on the long-term average.
Analysis close up
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TABLE 2 | Monthly take-up
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TABLE 3 | Year to date take-up
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TABLE 4 | Rents
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TABLE 5 | Supply
Demand figures include central London requirements
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TABLE 6 | Development pipeline
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 for preceding three months
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TABLE 7 | Demand & Under Offers
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TABLE 8 | Significant March transactions
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TABLE 9 | Significant supply
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MAP 1 | Savills City office market area (updated at the end of each quarter)
City 2018 Q1 stats