Take-up of office space in central London continued to outperform expectations in the first quarter of 2019, says Savills, with 1.2 million sq ft completing in the West End – the strongest first quarter in six years – and 1.16 million sq ft of new lettings being agreed in the City of London.
In the West End, 42 transactions completed in March alone taking total activity for Q1 2019 to 98 office lettings. Meanwhile, in the City, Savills figures report 100 occupational deals for the year to date, of which 33 completed in March. This makes Q1 2019 the fourth strongest first quarter for number of City deals in the last 20 years.
The Tech & Media sector accounted for the largest share of take-up in the West End, at 25%. The Insurance & Financial sector and Serviced Office providers were also active (both accounting for 21% of sq ft take-up activity) with the Financial sector accounting for a quarter of all deals (by deal number) to complete in the first quarter.
Ed Betts, co-head of the West End office leasing team at Savills, says: “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% on Q1 2018 and the strongest average prime rent seen since 2017.”
With 70% of new developments in the West End already pre-let, Savills expects the supply (4.0% vacancy rate) will remain stable over the year.
In the City, Savills says the Serviced Office Provider sector accounted for the greatest proportion of office take-up (20% of all sq ft take-up) followed by Insurance & Financial Services (18%). The firms figures suggest a slow start among the Tech & Media sector which accounted for just 10% of all Q1 take-up in the City. At the end of March the City had a vacancy rate of 5.2%.
Commenting on the City market, Philip Pearce, head of the central London office agency team at Savills, adds: “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% 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 West End, the largest transaction to complete in March was Glencore’s acquisition of the 2nd to 4th floors at Great Portland Estate’s 18-19 Hanover Square, W1, (52,691 sq ft), on a 20-year lease at £116 per sq ft. In the City, Savills says the largest deal to complete in March was by international law firm Milbank LLP pre-letting levels eight and nine (68,275 sq ft) at British Land/GIC’s development at 100 Liverpool Street, EC2.
Our BQ Bulletin emails will land in your inbox at 7.30am, Monday to Friday, with a mix of the latest local business news, national news, and features to inspire you. Sign up here!
Click here to read our privacy statement