savills.co.uk/research 01 West End Office Market Watch October 2014 Supply and demand snapshot n Take-up reached 1.1m sq ft in Q3 2014, matching Q2 and exceeding Q1 take-up. This brings take-up for the first three quarters of the year to 3.1m sq ft, 25% ahead of the long term average take-up for this period. n This solid performance by the West End will help take-up easily surpass the long term average take-up figure of 3.3m sq ft and potentially match take- up levels in 2014 of 4.1m sq ft. n Jupiter Asset Management's 56,350 sq ft pre-let of Land Securities Zig Zag scheme, which is due for completion next year, provided a boost to take-up figures in September. This brings number of pre-lets so far this year to 12, ahead of 8 per annum seen on average over a 10 year period. n As a result of this uptick in pre-letting activity, 58% of 2014 and 35% of 2015 development completions are pre-let. This coupled with the vacancy rate falling to 3.4% in September, its lowest level since October 2007, will see the West End experience a significant supply squeeze over the remainder of the year. n Furthermore, Grade A supply fell to 2.7m sq ft in September, which equates for 68% of total supply, its lowest level since December 2012. This represents a 24% fall over a 12 month period with the most significant fall being felt on units of >15,000 sq ft as opposed to smaller units which have seen an increase. n The most active business sector driving demand in the West End so far this year has been the Technology, Media and Telecoms (TMT) sector, accounting for 28% of take-up. Over the last five years (2009-13) the TMT sector has averaged a 24% share per annum. n The Business & Consumer Services sector is also performing ahead of its five year average of 10%, accounting for 17% share of 2014 take-up to end September. This is the result of the exponential rise in serviced office operator take-up across central London. n In September alone, serviced office operators accounted for 7 transactions totalling approximately 117,000 sq ft including Avanta at 5 Merchant Square, London Executive Offices at 23 King Street, SW1 and ServCorp at Devonshire House, 1 Mayfair Place, W1. n Total 2014 take-up from this sector has reached 313,000 sq ft, up 62% on 2013 and 350% on the five year average (2009-13) of 70,000 sq ft per annum. This a trend that is likely to continue as flexible leases and co- working which allows collaboration and networking opportunities become increasingly high on tenants agendas. Supply squeeze predicted over the remainder of 2014 as vacancy rate falls to 3.4% Source: Savills Research Source: Savills Research GRAPH 1 Take-up Source: Savills Research, *data to end September 2014 GRAPH 2 Business sector share of take-up Savills Research UK Commercial TABLE 1 Key September stats Stats Monthly change Take-up 383,167 sq ft Supply 4.1m sq ft Vacancy Rate 3.4% Top rent (psf) £107.50 Demand 2.7m sq ft 0 1 2 3 4 5 6 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 sq ft (million) Q1 Q2 Q3 Q4 10 yr average 0% 10% 20% 30% Banking Manufacturing & Industry Property Professional Extraction & Utilities Public Services Retail & Leisure Insurance & Financial Services Business & Consumer Services TMT 2014* 5 year avg (2009-2013)
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savills.co.uk/research 01
West End OfficeMarket Watch October 2014
Supply and demand snapshotn Take-up reached 1.1m sq ft in Q3 2014, matching Q2 and exceeding Q1 take-up. This brings take-up for the first three quarters of the year to 3.1m sq ft, 25% ahead of the long term average take-up for this period.
n This solid performance by the West End will help take-up easily surpass the long term average take-up figure of 3.3m sq ft and potentially match take-up levels in 2014 of 4.1m sq ft.
n Jupiter Asset Management's 56,350 sq ft pre-let of Land Securities Zig Zag scheme, which is due for completion next year, provided a boost to take-up figures in September. This brings number of pre-lets so far this year to 12, ahead of 8 per annum seen on average over a 10 year period.
n As a result of this uptick in pre-letting activity, 58% of 2014 and 35% of 2015 development completions are pre-let. This coupled with the vacancy rate falling to 3.4% in September, its lowest level since October 2007, will see the West End experience a significant supply squeeze over the remainder of the year.
n Furthermore, Grade A supply fell to 2.7m sq ft in September, which equates for 68% of total supply, its lowest level since December 2012. This represents a 24% fall over a 12 month period with the most significant fall being felt on units of >15,000 sq ft as opposed to smaller units which have seen an increase.
n The most active business sector driving demand in the West End so far this year has been the Technology, Media and Telecoms (TMT) sector, accounting for 28% of take-up. Over the last five years (2009-13) the TMT sector has averaged a 24% share per annum.
n The Business & Consumer Services sector is also performing ahead of its five year average of 10%, accounting for 17% share of 2014 take-up to end September. This is the result of the exponential rise in serviced office operator take-up across central London.
n In September alone, serviced office operators accounted for 7 transactions totalling approximately 117,000 sq ft including Avanta at 5 Merchant Square, London Executive Offices at 23 King Street, SW1 and ServCorp at Devonshire House, 1 Mayfair Place, W1.
n Total 2014 take-up from this sector has reached 313,000 sq ft, up 62% on 2013 and 350% on the five year average (2009-13) of 70,000 sq ft per annum. This a trend that is likely to continue as flexible leases and co-working which allows collaboration and networking opportunities become increasingly high on tenants agendas.
Supply squeeze predicted over the remainder of 2014 as vacancy rate falls to 3.4%
Source: Savills Research
Source: Savills Research
GRAPH 1
Take-up
Source: Savills Research, *data to end September 2014
GRAPH 2
Business sector share of take-up
Savills Research UK Commercial
TABLE 1
Key September stats
Stats Monthly change
Take-up 383,167 sq ft Supply 4.1m sq ft Vacancy Rate 3.4% Top rent (psf) £107.50 Demand 2.7m sq ft
*Average prime rents for preceeding 3 months ** Average rent free on leases of 5 years for preceeding 3 monthsCompletions due in the next 6 months are included in the supply figures
Sq ft Refurb Devs Total % Pre-let
2014 478,300 1,308,396 1,786,696 58%
2015 202,800 1,502,552 1,705,352 35%
2016 370,000 2,806,421 3,176,421 7%
2017 60,000 1,766,239 1,826,239 3%
Total 1,111,100 7,383,608 8,494,708 23%
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Market Watch | West End offices
Address Floor/s Sq ft Grade Achievedrent Tenant Lessor
39 Victoria Street, SW1 Bldg A 90,596 £69.50 Parliamentary Estates British Land Company
Zig Zag, 70 Victoria Street, SW1 7, 8, 9 A 56,357 £84.00 Jupiter Asset Management Land Securities
5 Merchant Square, W2 10-14 A 36,650 Undisclosed Avanta European Land & Property
23 King Street, SW1 1-3 A 23,707 Confidential London Executive Offices Standard Life
Devonshire House, 1 Mayfair Place, W1 1 A 14,500 £87.50 Servcorp Ponte Gadea Group
62 Buckingham Gate, SW1 pt 6 A 11,602 Undisclosed Kering Group Land Securities
10 Portman Square, W1 pt 1 A 10,250 £87.50 Ardagh Glass British Land
8 St James's Square, SW1 Bldg 67,500 A NQ Green Property
Ampersand, 180 Wardour Street, W1** 1, 2, 3, 4 64,660 A NQ Resolution / Peterson Group
2 Kingdom Street, W2 7, 8 50,000 A £55.00 British Land y
5 Merchant Square, W2 8, 9 45,770 A £60.00 European Land & Property
Walmar House, 288 Regent Street, W1 B-6 45,152 A NQ Great Portland Estates
Oxford House, 76 Oxford Street, W1 1-6 44,329 B NQ Great Portland Estates
2 Stephen Street, W1 1-4 42,538 A £70's Derwent London
125 Shaftesbury Avenue, WC2 1, 2 41,792 A NQ Almacantar
80 Strand. WC2 5 40,090 A £65.00 Pearson
50 Broadway, SW1 LG-3 39,826 A £39.50 Bircham Dyson Bell
TABLE 7
Significant September transactions
TABLE 8
Significant supply
*7th-9th floors, c.40,000 sq ft u/o, **4th floor, 13,300 sq ft u/o
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Market Watch | West End offices
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