City of London records exceptional month of office take up
Take-up for July in the City of London reached 1.02 million square feet across 29 deals, more than double the 420,000 square feet completed in June and the strongest single month take-up in almost two years.
The City Office Market Watch report from Savills also shows that over half, some 591,000 square feet or 58%, of take-up in July was for pre-let deals across five transactions in the City.
The largest pre-let deal in July, and of the year so far, saw BT Group pre-let the whole of One Braham Street, E1 equating to 328,011 square feet on a 15 year lease.
The insurance and financial services sector accounted for 21% of take-up so far this year. However, the serviced office sector continues their growth across London having also accounted for 21% of take-up this year.
July saw three deals to WeWork alone equating to 84,026 square feet and IWG pre-let the whole of 68 King William Street, EC4 equating to 78,000 square feet which is the third largest deal this year to a serviced office provider.
Currently, 5.8 million square feet of new space is expected to complete next year of which 24% is pre-let, against current requirements of 10.5 million square feet.
Savills says that supply will remain constrained beyond next year, with only 1.5 million square feet of speculative space scheduled to complete in 2021 and 2.3 million square feet in 2022.
Total City supply stood at 6.4 million square feet, equating to a vacancy rate of 5%, down by 30 basis points (bps) compared to last year, resulting in average grade A rents rising 5.2% year on year to £64.99 per square foot.
‘It has been an exceptional month for take-up in the City, with strong demand and low vacancy rates continuing to put upwards pressure on rents,’ said Philip Pearce, head of central London office agency team at Savills.
‘With a limited development pipeline the market is expected to remain under-supplied for the foreseeable future and we predict this will result in average rental growth of 2.2% per annum for the next five years,’ he added.