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West End Office Market Watch

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Space under offer across West End at record high of 1.9m sq ft at the end of September

Market comment and notable deals

  • September take-up reached 148,723 sq ft, bringing year-to-date take-up to 3.75m sq ft. Over Q3, 98 transactions completed and take-up at the end of quarter was up 32% on the long term average.
  • The most notable transaction this month was Vodafone's acquisition of two leases at 1 Kingdom Street, taking an assignment of the third floor (26,792 sq ft), at £55.21 per sq ft, and a new lease on part of the 1st floor, (10,055 sq ft), both on a five-year lease. This boosted Tech & Media sector take-up for the month to 41%.
Table 1

TABLE 1 | Key September stats
Source: Savills Research

  • So far this year the Tech & Media sector has accounted for 45% of take-up across 72 transactions. Almost three quarters of these transactions have been 10,000 sq ft or less. Although, it is worth noting Facebook's pre-let of 615,000 sq ft at King's Cross single-handedly accounts for 40% of overall sq ft let to the Tech & Media sector.
  • Despite monthly take-up being at its lowest in over five years, space under offer hit a new record high of 1.9m sq ft at the end of September, further underpinning that central London remains a crucial centre for business. Notable spaces currently under offer include 159,110 sq ft at 5 Merchant Square, W2, believed to be to WeWork and 52,725 sq ft at WestWorks, W12 to Novartis.
  • Sub 5,000 sq ft floorplates account for 30% of current space under offer with just shy of a quarter of space under offer is to Serviced Office Providers. At 370,000 sq ft this was the largest monthly increase in space under offer in almost over 18 months.
  • With space under offer at a record high level and up 109% on the long term average, we are expecting the final quarter of this year to be very active.
Graph 1

GRAPH 1 | Supply - space under offer
Source: Existing supply - space under offer end of September

  • The Serviced Office Provider sector take-up has accounted for 528,363 sq ft (16%) of YTD take-up, down 200,000 sq ft on the same point in 2017. If all of the space currently known to be under offer to Serviced Office Providers completes over the remainder of the year, this will increase take-up to the sector to just below the record level we saw last year.
  • The Insurance and Financial Services sector followed with 14% market share of the YTD take-up, with deal volumes at 72, continuing to remain at the same number as to the Tech & Media sector.
Graph 2

GRAPH 2 | 2018 YTD top five – sector take-up (sq ft)
Source: Savills Research – September 2018

  • At the end of September supply stood at 5.15m sq ft, equating to a vacancy rate of 4.2%. The 30 BPS increase since last month is largely due to the inclusion of White City to West End supply generating an addition 328,000 sq ft of space producing the largest upward movement in almost two years. When White City is excluded, supply totals 4.82m sq ft, equating to a vacancy rate of 4%, up 10 BPS.

Analysis close up

Table 2

TABLE 2 | Take-up
Source: Savills Research

Table 3

TABLE 3 | Supply 
Source: Savills Research

Table 4

TABLE 4 | Rents 
Source: Savills Research

Table 5

TABLE 5 | Demand & Under Offers
Source: Savills Research
Demand figures include central London requirements

Table 6

TABLE 6 | Development pipeline
Source: Savills Research
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

Table 7

TABLE 7 | Significant September transactions
Source: Savills Research

Table 8

TABLE 8 | Significant supply
Source: Savills Research