West End Office Market Watch

West End take-up for the year is already the third highest on record

Supply and demand snapshot

  • Take-up for 2018 reached 4.5m sq ft at the end of November, with 366,573 sq ft completing over the month. This brought take-up for the year to the third highest level on record, with one month of the year still to go.
  • Transaction volumes over the year have remained robust despite Brexit with 403 transactions completing over the year so far. We are set to see the fourth largest volume of transactions on record by the end of the year.
Table 1

TABLE 1 | Key November stats
Source: Savills Research

  • The largest transaction we saw complete in November was at WestWorks, Wood Lane, W12 with Novartis acquiring its new 49,117 sq ft headquarters on the 2nd floor on terms which remain confidential at present.
  • Over the month there were three further transactions to Serviced Office Providers increasing the record number of transactions we have seen to the sector this year to 30.
  • The most active Serviced Office Provider over 2018 has been Knotel who have acquired 6 new centres, the majority of which have been in the North of Oxford Street area.
  • Also in November we saw three transactions complete at the Brunel Building, with the 7th floor being let to Coach Stores, 6th to Alpha FX, and the Ground to 2nd floors to The Premier League, all on terms which remain confidential.
  • The Tech & Media sector has continued to be the main driver of demand, accounting for 39% of year to date take-up. This is followed by the Serviced Office Provider sector with 19% and Insurance & Financial sector with 15%.
  • Despite this the Insurance & Financial sector has overtaken the Tech & Media sector in terms of transaction volumes and has accounted for the largest number of transactions at 88 for the year so far.
Graph 1

GRAPH 1 | West End annual take-up
Source: Savills Research – November 2018

  • Space under offer in the lead up to 2019 remains double the amount of space we have seen under offer over the last 10 years at 1.5m sq ft, giving strong indication we will see good levels of demand next year.
  • After increasing to its highest point in over five years, the vacancy rate at the end of November was down 20 bps to 4.0% with supply standing 4.87m sq ft. This has largely been as a result of around 150,000 sq ft of space being withdrawn from the market.
  • In contrast with the City, average rents across the West End were down on the previous year, with the average prime rent standing at £102.28 per sq ft, down 14% and average Grade A rent at £75.64 per sq ft, down 6% on 2017.
Graph 2

GRAPH 2 | West End rents
Source: Savills Research – November 2018

  • Currently there is 8.4m sq ft of extensive refurbishments and developments scheduled for delivery until 2022, 37% (3.0m sq ft) of this has already 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 November transactions
Source: Savills Research

Table 8

TABLE 8 | Significant supply
Source: Savills Research