No sign of a slow-down as the City 12-month rolling take-up hits highest level since Sept 2015
Supply and demand snapshot
- Take-up for the month reached 870,113 sq ft across 31 transactions, with an average deal size of 28,253 sq ft. However, it is important to note that this includes the Chinese Embassy buying Royal Mint Court, EC3 (589,417 sq ft) for their own occupation. Without this deal the average deal size for the month is 9,547 sq ft.
- This brings total take-up for 2018 to 2.7m sq ft, which is 10% up on this point last year, and 30% up on the 10-year average for the first five months of the year.
TABLE 1 | Key May stats
Source: Savills Research
- The 12-month rolling take-up rose to 7.6m sq ft, which is 25% up on this point last year, and the highest it has been since September 2015.
GRAPH 1 | City 12-month rolling take-up
Source: Savills Research
- Last month saw three separate deals at The Minster Building, EC3. The largest of which saw serviced office provider Spaces acquire 37,000 sq ft across levels part G and 6. The fourth floor was also let in two separate deals to Tower Research Capital and Make It Cheaper, both acquiring circa 17,400 sq ft.
- Also in May, Insurance firm Coverys acquired the 6th floor (15,994 sq ft) of One Creechurch Place, EC3 on confidential terms. As the 10th floor is currently under-offer, there is only circa 53,500 sq ft remaining to be let in the Helical scheme.
- Following the Chinese Embassy deal at Royal Mint Court, EC3, the Public Services/ Governmental, Education & Health sector has now accounted for the greatest proportion of take-up so far this year at 22%.
- Beyond this, the balance of demand in the market has arisen from the Insurance & Financial services sector accounting for 19%, the Professional services sector at 15%, and the Tech & Media sector at 11%.
- Total City supply stands at 7.4m sq ft at the end of May, equating to a vacancy rate of 5.8%, which is up on this point last year by 40bps, but in parallel with the 5-year average.
- The City Core has the majority of the supply at 4.7m sq ft, which equates to a vacancy rate of 7.1%, compared with the City Fringe which has 2.7m sq ft of supply, and a vacancy rate of 4.4%. We anticipate the vacancy rate in both markets to remain stable for the next quarter, as all of the new space scheduled to achieve completion in Q4, and therefore to be added to supply, is currently under-offer.
GRAPH 2 | Total under-offer in the City
Source: Savills Research
- We are expecting just under 2m sq ft of office space to complete in the first quarter of 2019. However, 1.4m sq ft of this is either pre-let or under-offer, leaving circa 600,000 sq ft of speculative space. We would expect more of this to let or go under-offer in the next 6 months, further helping to keep the vacancy rate at a stable level.
- We also anticipate take-up levels to remain strong for the next quarter as there is currently 2.2m sq ft under-offer, which is 68% up on the long term average.
Analysis close up
TABLE 2 | Monthly take-up
TABLE 3 | Year to date take-up
TABLE 4 | Rents
TABLE 5 | Supply
Demand figures include central London requirements
TABLE 6 | Development pipeline
Completions due in the next six months are included in the supply figures
* Average prime rents for preceding three months
** Average rent free on leases of 10 years for preceding three months
N.B. We have amended our historic stock figures, resulting in a slight change of our historic vacancy rates (Aug 2015)
TABLE 7 | Demand & Under Offers
TABLE 8 | Significant May transactions
TABLE 9 | Significant supply
MAP 1 | Savills City office market area (updated at the end of each quarter)
City 2018 Q1 stats