December brings a new record rent, as supply continues to rise with a vacancy rate at 6.2%
Take-up at the end of December reached 205,780 sq ft, across 22 transactions which is largely in line with the average number of transactions that have completed on a monthly basis, since March. This was also up by 63% from the previous month.
In line with expectation, year-end take-up, at the end of December, stood at 1.7m sq ft. This amounts to a 63% fall in take-up this year compared to 2019, and is down 62% on the 10-year long-term average.
The largest transaction to complete during December was CPPIB’s lease of the Ground, 1st, and 4th floors, (42,173 sq ft), at 40 Portman Square. They have also decided to take a revisionary lease on the 2nd, 5th and 6th floors. Choosing to remain in their current location is a decision we have seen many other occupiers decide to do also. Another notable transaction was 30 Berkeley Square, W1, with OCI Limited taking part of the 6th floor, (2,703 sq ft), at a rent of £277 per sq ft. This has set a new record rent for the West End, as it is the highest rent achieved since our records began.
This record rent was excluded from the average prime rental figures, and so at the end of this quarter, the average prime rent achieved stood at £107.50. This is down 10% from the previous quarter, and down 5.7% from last year’s fourth quarter. However, the average Grade A rent was in line with 2019, as it stood at £79.97, a 1% increase.
December ended positively for the total amount of supply under offer, as it stood at 983,821 sq ft. This is 41% higher than the long-term average, and up 16% on December 2019. December saw a notable increase of supply, as the total stood at 7.1m sq ft, this is up 9.7% on the previous month, and 43% higher than that of December 2019. This takes the overall vacancy rate to 6.2%, the highest it has been in 10 years, and up 50 bps from last month.
However, in part this rise is due to the addition of speculative Q2 2021 completions, which were added to supply at the end of this quarter, adding 588,149 sq ft to supply. Most notably the development of Ilona Rose House, WC2, which has added 82,239 sq ft of Grade A space to supply.
Similar increases in vacancy rates can also be seen in Manhattan, where at the end of this year, the vacancy rate was up by 4% from the previous year, the highest it has been since 1999, illustrating how the London office market is reacting similarly to other international markets. The steady increase in the release of tenant-controlled supply that has been shown over the past few months has also contributed to driving up the level of supply. A further 233,198 sq ft was released in December, which raised the level of tenant-controlled space to 2.6m sq ft, a 9.6% increase on the previous month.
The end of this year saw development completions reach 781,340 sq ft. This is down 66% from last year, and is the lowest level of annual completions for the West End for over nine years. However, development prospects look more positive in 2021 as there is currently over 2.3m sq ft of developments scheduled for completion in the first half of next year, however, 82% of which has already been pre-let.