Vacancy rate increases to 5.7% as leasing activity continues to remain subdued
November take-up reached 77,132 sq ft across 12 transactions, despite the UK going into a second national lockdown. This is in line with the average number of transactions we have seen complete, on a monthly basis, since March, and up from seven transactions in October. November take-up was down 74% on the 10-year monthly average, with leasing activity continuing to remain subdued, on the whole, across central London.
Year-to-date take-up, at the end of November, stood at 1.5m sq ft, down 59% on the 10-year long-term average. We are anticipating take-up by the end of the year will reach 1.7m sq ft and will be down 60% on the 10-year average level of annual completions.
Typically, at this point in the year, 407 transactions would have completed, however, so far we have seen 40% of this, with 157 transactions having completed by the end of November. Almost two thirds (63%) of completions have been sized 5,000 sq ft or less. Grade A take-up accounts for 64% of the overall sq ft acquired in 2020.
The largest transaction that completed last month was at Beaumont House, Kensington Village, W14, with Arrival taking the 1st and 2nd floors, (17,198 sq ft), on a 16-year lease, at £49.50 per sq ft. This was followed by One Avenue’s acquisition of the 5th and 6th floors (16,253 sq ft) at 64 North Row, W1, on a 10-year term.
The Tech & Media sector continues to be the key driver of leasing activity this year, with a 35% share of take-up. This is followed by the Insurance & Financial sector with 17% and then by the Business & Consumer Services sector with 11%.
Space under offer crossed over to just above 1m sq ft. On the whole, this has broadly held at the same level over the past four months and is up 4% on the long-term average.
Active West End and central London requirements were down 17% on the previous month, standing at 6.6m sq ft at the end of November. However, this was still up on the long-term average by 1%. The Tech & Media sector accounts for a quarter of tenants actively searching for office space across the West End and central London. This is followed by the Professional Services sector with 22% and then by the Insurance & Financial sector with 18%.
Whilst we have seen a slowdown in the release of tenant-controlled space this month, supply ticked up during the month to 6.4m sq ft. This brought the vacancy rate to 5.7%, up 10 bps on the previous month and now up on the long-term average of 4.0% by 170 bps. We are anticipating that this will rise to 5.9% by the end of December with the addition of speculative Q2 2021 completions, which will be added to supply at the end of Q4.
The average prime rent achieved so far in H2 is currently £117.50 per sq ft, albeit the smaller sample size, due to the limited volume of transactions that have completed. This is down on H2 2019’s £119.55 per sq ft.
The average Grade A rent achieved so far over this period currently stands at £80.11 per sq ft, up on H2 2019’s £77.50 per sq ft. The average rent-free period, on a 10-year term achieved since October currently stands at 24 months.