West End Office Market Watch

The number of transactions to Serviced Office Providers is at a record high of 27

Supply and demand snapshot

  • Take-up picked up over October from the previous month's low to reach 381,388 sq ft, across 39 transactions, bringing take-up for the year to 4.1m sq ft.
  • There has been no sign of dampened appetite for space across the West End and we expect take-up to reach 4.8m sq ft by the end of the year, the third highest amount of take-up we have seen since our records began.
Table 1

TABLE 1 | Key October stats
Source: Savills Research

  • Demand over the month was primarily driven by the Serviced Office Provider sector, which accounted for 52% of take-up across seven transactions. This brought the number of transactions for the sector this year to a record high of 27, overtaking 23 in 2017.
  • So far this year we have seen 684,842 sq ft let to the sector, equating to just under 19% of overall take-up. And around 200,000 sq ft is currently under offer to the sector.
Graph 1

GRAPH 1 | Serviced Office Provider take-up
Source: Savills Research – October 2018

  • The most notable transaction to a Serviced Office Provider, and the largest deal this month, was to Spaces (IWG Group), who took the ground and first floors (42,098 sq ft) at The Foundry 77 Fulham Palace Road, W6 on a 15-year lease.
  • Knotel was the most active Serviced Officer Provider this month, acquiring c.40,000 sq ft across three buildings. The largest of the three was the 4th floor (22,985 sq ft) at 101 New Cavendish Street, W1.
Graph 2

GRAPH 2 | YTD Serviced Office take-up (sq ft)
Source: Savills Research – October 2018

  • With eight transactions completing during the month, the Insurance & Financial sector accounted for the largest number of transactions, despite only accounting for 11% of overall space let, with an average deal size of just 4,054 sq ft.
  • Total supply at the end of October remained at 5.15m sq ft, which equates to a vacancy rate of 4.2%.
  • While the overall amount of space on the market remained in line with the previous month, we saw the largest increase in tenant controlled space in over a year. At the end of the month tenant controlled space accounted for 31% (1.58m sq ft) of supply, up 5% on the previous month.
  • Notable new tenant space includes Jacobs Engineering's 102,000 sq ft at Elms House, Hammersmith, W6 and also 91,370 sq ft at Euston Tower, NW1 on the 21st, 24th–31st floors.
  • Space under offer at the end of October totalled 1.4m sq ft, down on the high levels we have seen over the last few months, but still substantially above the long-term average of 850,000 sq ft.
  • There is currently 8.37m sq ft of extensive refurbishments and developments scheduled for completion from 2019 to 2022, of which a third has been pre-let.

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 October transactions
Source: Savills Research

Table 8

TABLE 8 | Significant supply
Source: Savills Research