Savills has released its latest monthly report looking at the City occupational markets:
Despite being in ‘lockdown’ for the entirety of the month, take-up for April reached 165,653 sq ft across six deals, bringing the total for the year to date to 1.5m sq ft, which is slightly down on this point last year by 4% and 16% down on the 10-year average for this part of the year. The 12-month rolling take-up is now at 6.6m sq ft, which is 3% up on the 10-year average.
The largest deal to complete last month saw Covington & Burling LLP acquire levels 51-54 (85,768 sq ft) at TwentyTwo Bishopsgate, EC2. The Washington-based law firm will be moving from their current headquarters at 265 Strand, WC2 when the building achieves practical completion in the final quarter of this year.
Also last month, we saw SAP acquire levels 19 and 20 (20,782 sq ft) at The Scalpel, Lime Street, EC3. They have taken the space at the City tower on a 15-year lease at £79.00/sq ft with 34 months rent-free. The scheme, which completed in 2018 is now circa 92% let with just 28,556 sq ft remaining available.
The Professional Services sector continues to account for the majority of take-up with a 34% share at the end of April. They are followed by the Tech & Media sector and the Insurance & Financial services sector at 23% and 15% respectively. We anticipate these three sectors to be the primary source of demand for the remainder of the year, especially as the Serviced Office Provider sector have hit pause on acquiring new space, currently accounting for just 4% of take-up so far this year.
At the end of April this year there is currently 7.2m sq ft of available supply, equating to a vacancy rate of 5.3%, which is up on this point last year by 30bps but down on the long-term average of 6.6%. Currently, 80% of supply is of a Grade A standard, which is down on the five-year average of 84%.
We have started to see a slight uptick in tenant supply, rising from a 25% share in March (1.79m sq ft) to a 27% share at the end of April (1.95m sq ft), which is still below the long-term average of 29%. While this is by no means enough tenant supply to begin to affect rents negatively, it is proving our expectations to be correct, and the more tenant-controlled space we see arrive to the market in the next 6 months could result in a negative effect on rents.
Some of the notable tenant supply that has come to the market since lockdown began in mid-March includes 65,000 sq ft at the Blue Fin, SE1 building from HSBC, 20,300 sq ft at Aldgate Tower, E1 from Groupon, 17,000 sq ft at 1 Angel Court, EC2 from The Prudential, and 16,500 sq ft at 3 Waterhouse Sq, EC1 also from The Prudential.
Since the start of lockdown in mid-March, we have seen circa 382,000 sq ft of deals fall away in Central London, of which 85% is from the City (326,000 sq ft), the most notable being Salesforce withdrawing from 113,500 sq ft at 80 Fenchurch Street, EC3.
However, since the start of lockdown we have also seen circa 239,000 sq ft of space be placed under offer across Central London, of which 59% (141,677 sq ft) has come directly from the City.
At the end of April there is currently 1.9m sq ft of space under offer in the City, which is up on the long-term average by 44%. Of this 1.9m sq ft, 500,000 sq ft of it is under offer on future developments and refurbishments, the largest being JLL under offer to acquire 180,000 sq ft at 1 Broadgate, EC2, which is due for completion currently in 2025.
