High levels of pent-up underlying demand remain despite slow pace of leasing activity
May take-up reached 108,913 sq ft during the second month of full lockdown. This brought year to date take-up to 809,265 sq ft, with 13 transactions completing over the month. This was down on the long-term average for this period by 56%, and down 49% on January to May 2019 take-up. The inevitable impact of the majority of the quarter being carried out in lockdown, Q2 take-up is expected to be around just 300,000 sq ft, down 53% on the long-term average for the quarter.
The largest transaction to complete during May was Exane’s pre-let of the 5th to 7th floors (38,064 sq ft) at Great Portland Estates’ Oxford House, 1 Newman Street development, W1, on a 15-year lease at £100 per sq ft. This is the highest rent that has been achieved so far this quarter.
The Tech & Media sector has accounted for 36% of year to date take-up, followed by the Insurance & Financial sector with 25% and the Business & Consumer sector with 12%.
Despite the low level of transactional activity we have seen so far this year, space under offer, at 1.3m sq ft, continues to remain at a high level. While over the month we saw the overall amount of space under offer reduce by 14%, (215,316 sq ft), it still remains 86% above the long-term average. During the month an additional 53,000 sq ft went under offer, this is compared to the 31,000 sq ft which failed to complete. Notable space that is currently under offer includes 20 Manchester square, W1 (100,000 sq ft) which is under offer to Lazard and 25 Golden Square,W1 (66,000 sq ft) which was under offer to a Gamesys subsidiary and has now completed (in June).
Active requirements declined by 14% over the month to 3.7m sq ft with more occupiers putting their current requirements on hold, whilst they review or consider their options and some opting for short-term extensions in the interim. As a result of more requirements being put on hold we saw potential requirements increasing by 135% over the month, from 1.1m sq ft to around 2.7m sq ft.
The Tech & Media sector currently accounts for around a third, (32%) of active central London and West End requirements, followed by the Insurance & Financial sector with 17%, and the Professional Services sector with 15%.
At the end of May supply stood at 4.96m sq ft, which equates to a vacancy rate of 4.4%. This is up 10bps on the previous month, with the proportion of tenant-controlled supply rising by 2% on the previous month. Overall tenant-controlled supply currently accounts for 28% of supply (1.4m sq ft). Grade B space currently accounts for 45% of space available in the West End.
9.2m sq ft of developments are scheduled for completion until the end of 2023, of which 31% is already pre-let. A further 2.0m sq ft is currently anticipated for 2024, though this will most likely change with the passage of time due to inevitable delays.