Under-offers rise to 2.4m sq ft, as the City is set to overcome a sluggish start to the year
Take-up for January reached 206,674 sq ft across 21 deals, which was down on this point last year by 15% and down on the 10-year average for January by 45%. Grade A space remained the clear preference as it accounted for 75% of take-up, which is up on the 10-year average of 73%. The 12-month rolling take-up is now at 6.7m sq ft, which is in-line with the 10-year average.
The largest deal to complete last month saw MVF Global acquire levels 1 and 2 (40,809 sq ft) at Wenlock Works, Shepherdess Walk, N1 on confidential terms. The digital marketing company joins Checkout.com who acquired levels 3–6 (63,874 sq ft) back in November last year. Only the G and LG floors now remain in the Schroders building.
Also last month, we saw Finn Cap Plc acquire level 5 (19,609 sq ft) at One Bartholomew, EC1 on confidential terms. They join occupiers such as The Trade Desk, The University of Chicago Booth and BDP Pitman LLP amongst others. The Helical/Ashby Capital building is now entirely let.
If we strip out the unknown tenants, the Tech & Media sector accounted for the greatest proportion of take-up in January with 53% including the MVF Global deal and deals to Brilliant Basics at The Tower, The Bower, EC1 (11,331 sq ft) and Zinc Media at 17 Dominion Street, EC2 (7,291 sq ft) amongst others. This was followed by a strong performance from the Insurance & Financial Services sector, who accounted for 26% of take-up over three deals.
Total City supply fell last month by 1.4% and currently stands at 7.2m sq ft, equating to a vacancy rate of 5.4%, which is up on this point last year by 50 bps, but still down on the long term average by 120 bps.
The low level of take-up seen last month is not expected to continue as 795,269 sq ft went under-offer in January alone. The most notable being Salesforce going under-offer on 113,543 sq ft at the new Partners/YardNine scheme Eighty Fen, Fenchurch Street, EC3. There is currently 2.4m sq ft of supply under-offer, which is up on the long-term average by 82%, and therefore we expect to see above-average levels of take-up for the first quarter still.
The majority of supply is currently available within the City Core with 4.3m sq ft or 60% of total supply. Therefore, the vacancy rate within the Core, which currently stands at 6.7%, is 240bps higher than the City Fringe, which has a vacancy rate of 4.3%.
At the time of writing we are expecting an additional 1.7m sq ft of space to complete in H2 of this year, of which 28% is already pre-let, leaving just 1.2m sq ft of new supply to be added over the course of H1. The constraint on supply is not expected to be relieved throughout 2021 either, as we are currently expecting 3m sq ft of new supply, of which 29% is already pre-let, leaving just 2.1m sq ft of speculative space.
The amount of active requirements for the City and Central London have remained stable on last month, currently standing at 7.3m sq ft. However, the level of potential requirements fell on last month by 42%, currently standing at 1.4m sq ft, bringing the total to 8.7m sq ft, which is actually down on the 12-month average by 12%.
Of the 8.7m sq ft of known requirements, the Professional sector account for the greatest proportion at 34%, followed by the Tech & Media sector at 19% and the Insurance & Financial Services sector at 16%.