While take-up remains low, the increasing level of under-offers shows some positivity
Please note that this piece is not intended as an analysis of Covid-19 on the office market, rather a factual analysis of the market metrics.
We only saw six deals last month resulting in 65,020 sq ft of take-up. This brings the total for the year to date to 2.4m sq ft, which is 55% down on this point last year and 53% down on the 10-year average for the year to date. The 12-month rolling take-up is now at 3.8m sq ft, which is 41% down on the 10-year average, and the lowest it has fallen to since September 2009.
The largest deal to complete last month saw The New College of Humanities acquire levels Ground and First at Devon House, 58–60 St Katharine’s Way, E1W (38,786 sq ft). They took the space on a 15-year lease with a break in year 10.
It is looking likely that take-up will increase in the New Year as an additional 169,050 sq ft went under offer last month, which, when combined with September’s figure, is up on the previous five months by 29%.
This brings the total under-offer level in the City back up to 996,276 sq ft, which is the highest it has been since June this year. However, this is still down on the long-term average by 23%.
As expected there has been an increased appetite for core Grade A buildings this year. At the end of October, the City core has accounted for 64% of take-up, compared with a 57% share last year. Furthermore, Grade A take-up has accounted for 95% of the take-up in the City core, compared with a 87% share last year.
At the end of October, there is currently 9m sq ft of available supply, equating to a vacancy rate of 6.6%, which is up on this point last year by 110bps but still down on the long-term (15 years) average of 6.7%. Currently, 83% of supply is of a Grade A standard, which is down on the five-year average of 84%.
The City core accounts for the majority of supply with a 58% share of current availability resulting in a vacancy rate of 8.1%, significantly higher than that of the fringe locations which has a vacancy rate of 5.5%.
The sub 5,000 sq ft floorplate size-bracket accounts for the greatest number of units currently on the market with 553 (49%), compared with 480 (50%) at this point last year.
The average prime rent for the year to date is £80.77/sq ft, which is down on last year by 0.5%, but still up on the 10-year average by 20%.
The average Grade A rent for the year to date is £65.89/sq ft, which is actually up on last year by 2% and the 10-year average by 24%.
Encouragingly we have seen the amount of active requirements increase by 6% on last month, however, we also saw the level of potential requirements decrease by 17%. This has resulted in the total level of requirements settling at 9.7m sq ft at the end of October, which is down on this point last year by 5%.
The Professional Services sector accounts for the greatest proportion of City & Central London requirements with a 30% share. They are followed by the Tech & Media sector and the Insurance & Financial Services sector who account for 25% and 19% respectively.