West End Office Market Watch

Savills Research
UK Commercial
West End Office
Market Watch
Last minute surge in leasing activity results in
take-up hitting 4.2m sq ft
n The Technology, Media & Telecoms
sector (TMT) was the most active
sector in 2014 accounting for 32% of
take-up, significantly ahead of the five
year average (2009-13) share of takeup of 24%. Of the TMT companies
to acquire space last year, Media &
Entertainment companies have been
the most active, accounting for 35%
of TMT sector take-up, followed by
Technology companies accounting for
28%.
Q3
Q4
10 yr average
n Developments due for completion
in Q2 2015 include Blackstone's The
Adelphi, WC2, 93,875 sq ft of which
now remains, Coca Cola's 80,000 sq
ft 1 Queen Caroline Street, W6 and
The Crown's 75,000 sq ft Quadrant 2
South, Air Street, W1.
4
3
2
2014
2013
2011
2012
2010
2009
2008
2007
2006
2005
0
2004
1
2003
n The addition of several
developments due for completion in
Q2 2015 has resulted in the vacancy
rate rising to 3.4%, up from 3.3%
the previous month. This equates to
supply of 4.1m sq ft. Grade A supply
has also risen to 74% as a result of this
additional supply.
Source: Savills Research
GRAPH 2
Development activity
Complete
3.5
Pre-let
Speculative
Avg completions
3.0
2.5
n The highest reported rent in Q4 2014
was £120 per sq ft at 33 Davies Street,
W1. This equates to annual headline
rental growth of 9%. Average prime
rents grew by 5% over a 12 month
period and stand at £104.59 per sq ft
in Q4 2014.
2.0
1.5
1.0
2017
2016
2015
2014
2013
2012
2011
2010
2009
0.0
2008
0.5
2007
n Despite this, the vacancy rate
still remains at a very low level. Will
development activity in 2015 offer
some reprieve to restricted supply?
We estimate 2015 will see 2.2m sq
ft of developments and extensive
refurbishment complete, 24% ahead of
the long term average annual level of
1.8m sq ft. 30% of 2015 completions
are already pre-let, highlighting the
current supply squeeze.
2006
n We expect to see a similar levels
of pre-letting activity in 2015 as
witnessed last year. In total 14 pre-lets
were recorded in 2014, above the eight
seen per annum on average over a 10
year period.
Q2
5
2005
n In total, four transactions of
>100,000 sq ft were recorded in 2014
totalling 671,361 sq ft of total take-up.
The majority of transactions (37%) fell
in the 5-10,000 sq ft sizeband (in terms
of number of transactions).
Q1
6
2004
n Google's 207,000 sq ft acquisition
of the remainder of BNP Paribas's 6
Pancras Square provided a boost to
take-up figures.
Take-up
sq ft (million)
n 557,705 sq ft of take-up was
recorded in December in 28
transactions bringing an end to below
average levels of take-up seen over the
previous two months. This last minute
surge in take-up brings 2014 takeup to 4.2m sq ft, 22% ahead of the
long term average annual figure and
ahead of 2013's total of 4.1m sq ft, the
highest level since 2007.
GRAPH 1
sq ft (million)
Supply and demand
snapshot
January 2015
Source: Savills Research
TABLE 1
Key December stats
Stats
Monthly change
Take-up
557,705 sq ft

Supply
4.1m sq ft

Vacancy Rate
3.4%

Top rent (psf)
£115.00

2.3m sq ft

Demand
Source: Savills Research
savills.co.uk/research
01
Market Watch | West End offices
Analysis close up
TABLE 3
TABLE 2
Supply
Take-up
Month
Year to date
Sq ft
Sq ft
% change
on previous
year
% change
on average
Total
% Grade A
% chg on
prev mnth
Vacancy
rate (%)
Dec-13
329,664
4,085,194
33%
22%
4,644,988
75%
4.5%
3.8%
Jan-14
254,077
254,077
-75%
-13%
4,438,999
74%
-4.4%
3.7%
Feb-14
265,389
519,466
-55%
-3%
4,474,644
74%
0.8%
3.7%
Mar-14
363,789
883,255
-38%
6%
4,622,003
73%
3.3%
3.8%
Apr-14
386,685
1,269,940
-21%
24%
4,323,746
76%
-6.5%
3.6%
May-14
381,345
1,651,285
-7%
27%
4,175,057
74%
-3.4%
3.5%
Jun-14
326,527
1,977,812
-5%
18%
4,193,382
74%
0.4%
3.5%
Jul-14
318,879
2,296,691
0%
22%
4,186,477
71%
-0.2%
3.5%
Aug-14
445,119
2,741,810
2%
30%
4,189,683
71%
0.1%
3.5%
Sep-14
383,167
3,124,977
-2%
25%
4,053,774
68%
-3.2%
3.4%
Oct-14
224,565
3,349,542
-1%
21%
4,075,206
68%
0.5%
3.4%
Nov-14
244,188
3,593,730
-4%
20%
4,023,249
69%
-1.3%
3.3%
Dec-14
557,705
4,151,435
2%
22%
4,057,113
74%
0.8%
3.4%
TABLE 4
TABLE 5
Rents
Demand & Under Offers
Average
£ per sq ft
Top
Grade A
Grade B
WE Potential demand (sq ft)
Prime*
Rent
free**
717,000
WE Active demand (sq ft)
1,548,500
2,265,500
Dec-13
£110.00
£67.11
£45.14
£99.85
8
WE Total demand (sq ft)
Jan-14
£115.00
£57.01
£41.34
-
-
% change on 12 month ave
Feb-14
£95.00
£67.31
£42.50
-
-
Total under offer (sq ft)
512,964
Mar-14
£115.00
£68.79
£33.88
£99.13
8
Under offer this month (sq ft)
219,648
Apr-14
£100.00
£64.52
£37.86
-
-
% change on ave
-15%
May-14
£115.00
£58.30
£43.64
-
-
Landlord controlled supply
59%
Jun-14
£110.00
£84.31
£34.83
£103.33
9
Tenant controlled supply
18%
Jul-14
£90.00
£54.59
£30.00
-
-
Aug-14
£107.50
£74.81
£37.50
-
-
Sep-14
£107.50
£73.27
£35.99
£98.25
9
Oct-14
£92.00
£66.88
£45.10
-
-
Nov-14
£120.00
£64.74
£33.10
-
-
Dec-14
£115.00
£82.84
£47.40
£104.59
8
-33%
TABLE 6
Development pipeline
Sq ft
Refurb
Devs
Total
% Pre-let
2014
478,300
1,294,396
1,772,696
61%
2015
259,800
1,972,954
2,232,754
30%
2016
445,000
2,707,421
3,152,421
7%
2017
0
1,767,000
1,767,000
3%
Total
1,183,100
7,741,771
8,924,871
Completions due in the next 6 months are included in the supply figures
02
23%
*Average prime rents for preceeding 3 months ** Average rent free on leases of 5 years for preceeding 3 months
Market Watch | West End offices
TABLE 7
Significant December transactions
Sq ft
Grade
Achieved
rent
Tenant
Lessor
B-pt 5, 11
207,117
A
Confidential
Google
AXA
The Adelphi, 1-11 John Adam
Street, WC2
1, 2
63,145
A
Confidential
Neuehouse
Blackstone
Walmar House, Regent Street, W1
Bldg
38,956
A
Confidential
Richemont
Great Portland Estate
33 Davies Street, W1
1, 2
11,818
A
£115.00
AGC Equity Partners
Grosvenor Estate
Devonshire House, 1 Mayfair
Place, W1
pt 2
11,381
A
£101.11
LTS Advisory Ltd
Ponte Gadea Group
10 New Burlington Street, W1
2
10,252
A
£102.50
Finnisterre Capital
Crown Estate
St. James's House, 23 King Street,
4
7,843
A
Confidential
Balyasny Europe Asset
Standard Life
2 Pancras Square, King's Cross,
N1C
pt 4
7,545
A
£70.00
Astra Zeneca
Vista Print
2 Stephen Street, W1
4
6,340
A
£80.00
Freemantle
Derwent London
Berkeley Square House, Berkeley
Square, W1
4 suite 4
5,145
A
£82.50
Cheniere Marketing
Undisclosed
Address
Floor/s
6 Pancras Square, N1C
TABLE 8
Significant supply
Address
Floor/s
Sq ft
Grade
Quoting
rent
Park House, Park Street, W1
2-5, 7, 8
143,010
A
£97.50
QNB
Telstar House, 2 Eastbourne Terrace, W2
1-6
106,812
A
£47.19
Rio Tinto
10 Bloomsbury Way, WC1
1-7
117,000
A
£60's
The Adelphi, John Adam Street, WC2
3-6
93,875
A
NQ
62 Buckingham Gate, SW1
3-pt6
83,805
A
£70.00
Land Securities
2 Fitzroy Place, Mortimer Street, W1
Bldg
81,233
A
NQ
Aviva / Exemplar
1 Queen Caroline Street, W6
Bldg
80,000
A
NQ
Coca Cola
Quadrant 2 South, Air Street, W1
Bldg
75,000
A
NQ
Crown Estate
127 Sloane Street, SW3
Bldg
71,000
A
NQ
Cadogan
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
91 Wimpole Street, W1
Bldg
57,000
A
NQ
Lazari
Air W1, 20 Air Street, W1
4, 5
50,980
A
NQ
Telefonica
77-85 Shaftesbury Avenue, WC2
Bldg
47,000
A
NQ
Dolford
Oxford House, 76 Oxford Street, W1
1-6
44,329
B
NQ
Great Portland Estates
80 Strand, WC2
5
40,090
A
mid £60's
03
Lessor
U/O
London & Regional
Blackstone
Pearson
y
Market Watch | West End offices
MAP 1
Savills West End office submarkets
Please contact us for further information
Tracy Collins
Director
0207 409 8958
[email protected]
Liell Francklin
Director
0207 409 8712
[email protected]
Nick Pearce
Associate Director
0207 409 8740
[email protected]
Freddie Corlett
Associate Director
0207 409 8764
[email protected]
Tim Wadhams
Director
0207 409 8803
[email protected]
Brian Allen
Director
0207 409 8778
[email protected]
Mark Gilbart-Smith
Director
0207 409 5925
[email protected]
Andrew Wedderspoon
Kuldeep Gadhary
Associate
Research
0207 409 8706
0207 016 3832
[email protected] [email protected]
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