Over March take-up reached 153,891 sq ft across 23 transactions with Covid-19 isolation measures taking grip over the latter half of the month. This brought year-to-date take-up to 617,747 sq ft, down 35% on the long-term average for the first quarter. The volume of transactions to complete so far this year was also down on the average we have seen complete over this period by over a third (36%).

Whilst the impact of the pandemic continues to evolve, we expect to see more re-negotiations occurring over the next quarter and anticipate take-up for 2020 will be down by 30% on the long-term average, with the supply and demand dynamic supporting a more resilient level of leasing activity than was seen after the 2007/2008 financial crash.

The largest transaction to complete over the month and since the start of lockdown was Dun & Bradstreet’s acquisition of the sub-lease of the 2nd floor (23,108 sq ft) at The Point, W2, at a passing rent of £60.00 per sq ft.

Space under offer continued to remain high with an additional 133,902 sq ft going under offer over the month. This compares with 16,500 sq ft worth of transactions which fell through as a result of Covid-19, the equivalent of 12% of the volume that went under offer over the month. In total at the end of the quarter space under offer stood at 1.4m sq ft, this is up 107% on the long-term average.

We have continued to see strong demand from the Tech & Media sector which has accounted for 48% of leasing activity, followed by the Insurance & Financial with 18% and the Business & Consumer Services sector with 12%.

Active West End & Central London requirements remained broadly stable over the month standing at 5.2m sq ft, down 2% on the previous month with demand for newly developed space continuing to remain outstripped by supply.

Total supply at the end of the month stood at 4.8m, which equates to a vacancy rate of 4.2%. This is down 20 bps on the end of February, despite 189,000 sq ft of Q3 speculative completions being added to supply. 55% of current supply is of Grade A standard, down from 70% at the end of the same period in 2019.

Whilst we are expecting to see tenant-controlled supply rise over the next few quarters, as at the end of the first quarter this was yet to materialise with it currently accounting for 25% of overall supply, down 3% since the start of the year. There has already been evidence of a marginal uptick of tenant-controlled space since the start of April, which is the equivalent of a 2% rise.

Average prime rents at the end of Q1 stood at £110.50 per sq ft, down 7% on Q1 2019 and the average Grade A rent stood at £73.94 per sq ft, down 5% on Q1 last year. Whilst the sample size remains small, the average rent-free period achieved stood at 23 months, moving out by three months from 20 months in Q4 2019. The average rent-free period has remained between 20–22 months since Q3 2018.

During 2020, 1.1m sq ft is scheduled for delivery, this is down from the 1.5m sq ft we anticipated at the start of the year with 500,000 sq ft being pushed out further into Q1 2021 due to delays on construction sites. As a result, the overall space that has been pre-let in 2020 has reduced to 55% and in 2021 increased to 55%.

Analysis close up

Search for a commercial property