Central London Office Space Take-up strongest for Six Years

Continuing to outperform expectations, the first quarter of 2019 saw central London office space take-up at its strongest for six years.

According to property experts Savills, a reported 1.16 million sq ft of new lettings are also being agreed in the capital. Central London office space take-up also remained strong in the West End, where 42 transactions completed in March alone bumped total activity for Q1 2019 up to 98 office lettings. There were 100 occupational deals for the year to date, 33 of which were completed in March.

Sectors battle for Central London office space take-up

The tech and media sector accounted for the largest share in the West End (25%) while the capital benefited from a wave of serviced offices.

Meanwhile, the insurance and financial sector and serviced office providers were also both very active. Both accounted for 21% of central London office space take-up activity, with the Financial sector accounting for a quarter of all deals to complete in Q1 2019.

Savills say the Serviced Office Provider sector accounted for the largest proportion of office take-up (20% of all sq ft central London office space take-up) with Insurance & Financial Services following closely behind with 18% take-up.

The firm’s figures suggest a slow start for those in the Tech & Media sector across the capital, which accounted for just 10% of Q1 of central London office space take-up. The capital had a vacancy rate of 5.2% at the end of March.

The Rise of the West End

Co-head of the West End office leasing team at Savills, Ed Betts, said: “The increased competition to secure the best West End space, fuelled generally by lease events but also by a growing awareness among occupiers of supply constraints, is beginning to reflect on rents in certain sub-markets. Whilst we are not expecting to see overall rental growth going forward this year, in the first quarter we have achieved an average prime rent of £119.30 per sq ft, up 13 per cent on Q1 2018 and the strongest average prime rent has seen since 2017.”

70% of the new developments in the West End are already pre-let, with Savills predicting the supply (4% vacancy rate) to remain stable over the year. Read more about West End office take-up in our recent article.

The largest transaction to be completed in March in the West End was Glencore’s acquisition of the 2nd to 4th floors at Great Portland Estate’s 18-19 Hanover Square, W1, equating to 52,691 sq ft, on a 20-year lease at £116 per sq ft.

The City’s Office Market

Philip Pearce, head of the central London office agency team at Savills commented: “The City’s office market remains stable with low supply levels and continued stronger-than-expected demand, resulting in rents remaining consistent in the high £70’s per sq ft for prime. Of the deals signed in the first quarter, 45 per cent have been for 10 years or more which is further evidence of the ongoing resilience of the market despite Brexit uncertainty being delayed further.”

In the City, Savills says the largest deal to be completed in March was by international law firm Milbank LLP pre-letting levels eight and nine equating to 68,275 sq ft, at British Land/GIC’s development at 100 Liverpool Street, EC2.