Low supply in the West End continues to drive further pre-lets
Take-up in July reached 435,280 sq ft across 30 transactions as pre-lets continued to drive leasing activity across the West End. Overall there have been 16 pre-lets this year and so far they have accounted for almost a third (32%) of space taken.
Year-to-date take-up stood at 2.5m sq ft, across 213 transactions. Overall take-up is up 14% on the long-term average for this period.
Soho has accounted for a third of space that has been pre-let this year, and this month we saw the first pre-let from the 2022 development pipeline, with Diageo taking Lazari’s 14–18 Great Marlborough Street, SW1, (105,000 sq ft), relocating its global headquarters from Park Royal Business Park, NW1O.
In July, Brockton Everlast and Oxford Properties’ Post Building, WC1, became fully pre-let, with Nationwide taking the remaining space on the first to fourth floors (88,510 sq ft), on confidential terms. The space will be used to form its new technology and innovation centre.
Whilst the Tech & Media sector continues to be main sector driving pre-lets in the West End, this year the Insurance and Financial sector has accounted for 20% of the volume so far across five transactions. We expect to see more pre-lets from the Insurance & Financial sector over the next few years with the sector accounting for over quarter of occupiers with upcoming lease events in the West End and with supply continuing to remain restricted.
Underlying demand also continues to remain strong with central London & West End requirements standing at 5.9m sq ft, up 40% on July 2018’s 4.2m sq ft. The Tech & Media sector continues to be a key driver of demand accounting for 23% of West End & central London active and potential requirements, along with the Insurance & Financial sector, which accounts for 20% of current requirements.
The vacancy rate at the end of the month stood at 4%, down 10 bps on the previous month with 4.9m sq ft available across the West End. We expect the vacancy rate will continue to remain broadly stable unitl the end of the year before rising over the next year to 4.4%. Tenant controlled space continues to remain stable and currently accounts for 1.4m sq ft (30% of supply).
In total, 10.5m sq ft is scheduled for delivery over the next four years, and 22% of this space has already been pre-let. An additional 500,000 sq ft, (6%) of the 8.1m sq ft of remaining speculative space is under offer, giving strong indication we are set to see further pre-lets over the remainder of this year.
Over half (55%) of the 2m sq ft of developments and extensive refurbishments which are scheduled for delivery next year have been pre-let. This has reduced the amount of speculative space expected to be delivered next year to 900,000 sq ft, and we expect this will continue to reduce as we approach 2020.