Savills has released its latest monthly report looking at the City occupational markets:
Take-up for April reached 374,571 sq ft, resulting in the total for the year reaching 1.5m sq ft, which is down on this point last year by 19%, and down on the 10-year average for this time period by 12%. This brings the 12-month rolling total to 7.4m sq ft, which is actually up on the 5-year average by 0.6%.
The largest deal to complete in April saw financial services firm Quilter acquire levels 3 to 6 (81539 sq ft) at the recently refurbished Senator House, 85 Queen Victoria Street, EC4 owned by L&G. Quilter will be vacating their current London base at Millennium Bridge House, EC4, which is due to be refurbished once the new owners, Angelo Gordon & Beltane, obtain vacant possession in September 2020. Following the Quilter deal, the first floor was let this month to an unknown occupier, leaving just the lower ground and ground floor available to let.
Also in April, we saw two lettings at the new Helical/Ashby Capital scheme One Bartholomew, EC1. The University of Chicago Booth acquired levels G – 2 (42,948 sq ft) on confidential terms, while InfraRed Capital Partners Ltd acquired the 7th floor (19,504 sq ft) at a headline rent that surpassed £80/sq ft. This leaves levels 3 – 6 currently available equating to circa 77,000 sq ft.
So far this year, units with floorplates less than 5,000 sq ft have accounted for the greatest number of deals at 54 out of 125, with the 5,000 – 10,000 sq ft bracket accounting for the second most at 38. Interestingly though, the majority of deals for units with floorplates over 10,000 sq ft have taken place in the City core as opposed to the fringe areas. Of the 33 deals for floorplates over 10,000 sq ft, 25 of them have been in the City core. Likewise, there are currently 129 units for floorplates over 10,000 sq ft in the City core, compared with 80 in the fringe areas.
The Insurance & Financial services sector has continued to be the primary source of demand for office space in the City, having seen 27 deals equate to 379,000 sq ft and 25% share of total take-up. They are closely followed by the Serviced Office Provider sector, who continue to acquire space across the capital, they have now accounted for 19% of take-up. Surprisingly, there has been a slow start to both the Tech & Media sector and the Professional services sector, who have accounted for 9% and 8% respectively.
Total City supply at the end of April stood at 6.7m sq ft, falling by 0.1% on the end of last month and equating to a vacancy rate of 5.2%, which is down on April 2018 by 60 bps, and down on the long term average by 140 bps.
Encouragingly we haven’t seen an increase in the amount of grey space available in the City, with the current share of total supply for tenant space only at 25%, the same as it was at the end of last year.
While we are expecting an increase in the vacancy rate in the second half of this year, the forward looking metrics remain in a strong position. There was 449,000 sq ft of space that went under offer in April alone, bringing the total to 1.8m sq ft, which is up on the long-term average by 35%. Moreover, we are currently tracking circa 9.7m sq ft of Central London & City requirements, which is up on the long-term average by 10%.
