Market in Minutes: West End Office Market Watch

A quiet April for take-up, but space under offer picks up and the increase of tenant supply slows

After a strong March, transactional activity across April became more subdued, with the monthly take-up reaching 101,850 sq ft, across nine transactions. This brought year-to-date take-up to 625,187 sq ft, down 11% from the same point last year, and down 58% on April’s long-term average.

From the completed transactions, there were no pre-lets or subleases last month, and two-thirds of the transactions that took place were below 10,000 sq ft. However, the largest transaction to take place was the purchase of 10 Great Pulteney Street, W1, (46,000 sq ft), by the online retail giant, this brought the Retail & Leisure sector to account for 23% of the total amount of take-up so far this year. This is second to the Insurance & Financial sector which accounts for 34%.

Despite the lower levels of transactional activity, last month saw a healthy amount of space go under offer across the West End. The total for April reached 176,731 sq ft, which is the strongest month we have seen since September 2020. This brought the total across all available supply, and future developments, to 1m sq ft. This is up 19% from the long-term average, and also up 28% from the previous month's total.

Notable space that is currently under offer includes the Belgrove House development, WC1, (140,000 sq ft), and 50,000 sq ft of space at Yoo Capital’s Kensington Olympia development.

While space under offer remains robust, so to have the levels of active requirements across central London and the West End. The total number of active requirements last month stood at 4.8m sq ft. This is 1% above the long-term average, and 10% higher than April 2020, which suggests a level of confidence is returning to the office occupational market, as a greater number of lockdown measures are being eased.

Across the different business sectors, the Tech & Media sector still accounts for the largest proportion of active requirements at 27%. While the Insurance & Financial sector accounts for the second largest, with 22%, followed by the Professional sector with 17%.

The vacancy rate was up 20 bps on the previous month, with supply standing at 8.1m sq ft, which equates to a vacancy rate of 7.1%. Although this total has risen by 12% from the start of the year, tenant-controlled supply is showing indications of slowing down, with only 19,629 sq ft of additional tenant space being added to the market in April. As a result, tenant supply still accounts for 40% of the overall level of supply, where it has remained for the past three months.

In total, there are around 55 floors of Grade A standard which could satisfy a single floor requirement over 15,000 sq ft, with over a third of these located in Hammersmith or Victoria.

Over the next four years, 8.7m sq ft of speculative space is set to be delivered across the West End. From this, 28% are extensive refurbishments, while the rest is made up of developments. Following on from the strong levels of developments this year, 2022 is no different. Over the year, there is set to be 3.5m sq ft of space ready for completion – 30% of this space has already been pre-let.

Analysis close up

In Focus – Soho

Soho, Carnaby

Carnaby – Soho

This month, we have taken a closer look at supply in Soho as it is currently the sub-market in the West End that has the largest amount of available supply (525,282 sq ft). This has risen 140% from Q1 2020 and equates to a vacancy rate of 8.3%. However, Soho also accounts for the largest amount of space under offer since the start of this year. There is currently 78,637 sq ft of space under offer, 22,030 sq ft of which occurred in April, which makes up 12% of 176,731 sq ft of space that occurred across the West End – this suggests that demand is still high in this area.

Grade A supply accounts for 78% of space, and there are only nine floors, which could satisfy a single floor requirement above 10,000 sq ft. In terms of development for the area, although there are a number of extensive refurbishments and new developments due to complete over the next four years, totalling 1m sq ft, 54% of this has already been pre-let.