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City Office Market Watch

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Contacts & Related Research

The City Office market continues to surprise with no signs of oversupply

Market comment and notable deals

  • We have continued to see strong demand in the City this year with take-up for July reaching 608,234 sq ft across 34 transactions.
  • This brings total take-up for 2018 to 4m sq ft, which is 13% up on this point last year, and 26% up on the 10-year average for take-up to the end of July. There have been a total of 236 transactions so far this year, which is down on this point last year (250), but up on the 10-year average of 226.
Table 1

TABLE 1 | Key July stats
Source: Savills Research

  • The rolling 12-month total take-up reached 7.8m sq ft at the end of July. This is the highest it has been since August 2015.
  • Last month saw Investec Asset Management acquire the whole of 55 Gresham Street, EC2 (121,569 sq ft). The global financial services company will be moving from their current premises in Woolgate Exchange, EC2. They have taken the new space at £65/sq ft on a straight 15-year lease with 36 months rent free.
  • Also in July, The Trade Desk acquired levels 9 - 11 (54,261 sq ft) at One Bartholomew, EC1. The digital advertising company has agreed to pay a rent in the mid £80's/sq ft on the 9th, 10th and 11th floors. This is one of the highest rents ever achieved in the City on a low-rise building, and shows both the quality of the building and the increased desire to be close to Farringdon station.
  • Following the Investec AM deal, the Insurance & Financial services sector has accounted for the greatest proportion of take-up this year at 18%. That equates to 730,503 sq ft, which is up on this point last year by 73%, and 10% up on the LT avg to the end of July. The Tech & Media sector has continued to take space in the City, now accounting for 16% of take-up, equal with Public Services/ Governmental, Education & Health.
Graph 1

GRAPH 1 | City 12-month rolling take-up
Source: Savills Research

  • There were four deals last month to the serviced office sector totalling 171,524 sq ft. WeWork, TOG, LEO and Spaces all transacted, showing that the sector, which now accounts for 12% of take-up for this year, is still hungry for more space.
  • Total City supply stands at 6.8m sq ft at the end of July, equating to a vacancy rate of 5.3%, which is down on this point last year by 70 bps, and down on the long term average by 130 bps. This is the lowest the vacancy rate has reached since August 2016.
  • While only 211,037 sq ft went under-offer in July, there is currently 2m sq ft under-offer, which is 52% up on the long term average.
  • The supply demand balance remains in a very healthy position for the City. At the current rate of take-up, there is only 10.8 month's worth of supply available (assuming no more supply was to be added). This is significantly below the trigger point of 20 months, and the lowest since May 2016.
Graph 2

GRAPH 2 | City supply/demand balance
Source: Savills Research

Analysis close up

Table 2

TABLE 2 | Monthly take-up
Source: Savills Research

Table 3

TABLE 3 | Year to date take-up
Source: Savills Research

Table 4

TABLE 4 | Rents
Source: Savills Research
*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 figures, resulting in a slight change of our historic vacancy rates (Aug 2015)

Table 5

TABLE 5 | Supply
Source: Savills Research
Completions due in the next six months are included in the supply figures

Table 6

TABLE 6 | Development pipeline
Source: Savills Research

Table 7

TABLE 7 | Demand & Under Offers
Source: Savills Research
Demand figures include central London requirements

Table 8

TABLE 8 | Significant July transactions
Source: Savills Research

Table 9

TABLE 9 | Significant supply
Source: Savills Research