In September take-up reached 321,103 sq ft across 24 transactions. This brought take-up for the year so far to 3.05m sq ft. Whilst this is down 19% on the same period a year earlier, take-up still remains above the long-term average for this period by 3%.

The largest transaction we saw complete over the month was Bridgepoint’s pre-let of seven floors (83,000 sq ft), at Almacantar’s 5 Marble Arch development, which is set for completion in Q4 2020. In total around 950,000 sq ft has been pre-let this year, this accounts for 31% of overall take-up. Just over a quarter (26%) of the development pipeline for the next four years has already been pre-let and a further 10% of the pipeline is currently under offer.

We expect take-up for 2019 to reach 4.2m sq ft with underlying demand having picked up over the quarter. At the end of Q3, space under offer at 1.9m sq ft is at its highest point in over a year and West End/Central London requirements, at 6.3m sq ft, are at their highest point in over two years.

This year take-up has been dominated by three sectors the Tech & Media, Insurance & Financial sector and the Serviced Office Provider sector. However the gap between these sectors has narrowed, with Tech & Media sector accounting for 21% of take-up and the Insurance & Financial sector following behind with 20%. Despite this the Insurance & Financial sector has accounted for over a quarter of the number of transactions that have completed this year. The Serviced Office Provider sector followed behind with an 18% share and has accounted for 534,465 sq ft of space let. This is roughly in line with the amount of space taken by the sector over the same period in 2018.

WeWork has accounted for 20% of space let to the Serviced Office Provider sector this year and now has acquired around 1.1m sq ft of centres in total across the West End. At the end of September WeWork was believed to be under offer on 280,000 sq ft, though there is still a lack of clarity on its long term strategy for its Central London centres in light of its recent withdrawn IPO and subsequent funding it has secured.

However less than a third (28%) of WeWork’s Central London commitments are in the West End and as a result the market is particularly well insulated from any major consolidations of centres. To illustrate this point if we take the hypothetical, though extremely unlikely scenario of WeWork walking away from all its commitments in the West End, looking at the current rate of demand supply would equate to 15 months’ worth of take-up. Using the same assumptions that no further space is added to supply current supply equates to 12 months worth of take-up at the rate we have seen over the past year.

Overall balance between supply and demand still remains below the ‘over-supply’ mark of 20 months for both the City and the West End illustrating the fairly limited impact any WeWork scenarios would have on the market as a whole.

At present supply stands at 4.5m sq ft, which equates to a vacancy rate of 4%. Limited supply across the West End is continuing to uphold prime rents and the average prime rent achieved over Q3 stood at £120.00 per sq ft, up 13% on £106.11 in 2018 over the same quarter. The average Grade A rent was also up 10% on the same period in 2018 and stands at £82.57 per sq ft.

Analysis close up