⊲ Take up in the ‘core’ West End markets was 22% below trend levels in the first two quarters of 2019, with 1.1m sq ft of activity recorded. The number of transactions completing in the six months were also down, falling to 303 compared to 398 for the same period in the previous year.
⊲ The largest transaction in the year to date was the 102,600 sq ft letting to G Research at Derwent London’s 285,000 sq ft mixed use scheme Soho Place, above the new Elizabeth Line station at Tottenham Court Road. When complete, the scheme will comprise 209,000 sq ft of offices, 30,000 sq ft of retail and a new 40,000 sq ft theatre. The scheme is due to complete in H1 2022.
⊲ Supply continued to edge downwards, moving down to 2.3m sq ft from its recent peak of 3.4m sq ft in 2017. Grade A supply in the ‘core’ West End markets fell below 1m sq ft. the lowest level in more than 13 years as occupiers continued to move to quality accommodation. The supply of un refurbished space on the market has increased 40% since the end of 2018.
⊲ Prime rents rebounded in Q2 2019, with rents up by 4.6% on average across the ‘core’ markets. The most significant increase was seen in Covent Garden, where rents were up by 10.3% on the quarter to £80.00 per sq ft. Rents on refurbished space also moved up by 1.7%, although the picture across the six sub markets was rather more varied. Average rents on un refurbished stock edged down, as supply for this Grade of increased.
⊲ Take up has remained subdued in the first six months of 2019, with a total of 245,500 sq ft of activity recorded, 33% below the same period last year. Transaction levels are also down, with 69 transactions completed in the first six months of the year compared to 125 in H1 2018.
⊲ The main reason behind the slowdown in activity has been the easing in transactions in the mid sized maket (2,500-10,000 sq ft), where activity was down by 58% on the previous year. Larger transactions have remained resilient, with the 53,920 sq ft pre let to Glencore at Great Portland Estates development of the Hanover Square Crossrail site in Q1 2019 still being the largest transaction in the year to date.
⊲ Supply has edged up since the start of the year standing at 606,900 sq ft at the end of Q2 2019. The supply of Grade A space, however has continued to tighten, falling by 20% since the end of 2018 to 192,100 sq ft.
⊲ Rents in Mayfair rebounded after a set back in Q1 2019. Prime rents moved back to £115.00 per sq ft, growth of 7.0%, the first upward movement in rents in almost two years. Rents on refurbished space regained the ground lost in the first quarter, moving back to £85.00 per sq ft.
⊲ A strong second quarter of the year pushed take up in the St James’s market to above trend levels, with 178,500 sq ft of lettings completing in the first half of the year. A total of 34 transactions were recorded in H1 2019, broadly in line with levels of activity in the same period in 2018.
⊲ The largest deal to complete in H1 2019 has been the 51,300 sq ft letting to CinVen at Columbia Threadneedle’s 21 St James’s Square. CinVen took the majority of the building, leaving only the 2,976 sq ft lower ground floor available. Following the letting Columbia Threadneedle put the building on the market for offers in excess of £200m.
⊲ Availability in St James’s is the highest amongst the ‘core’ West End markets, with 405,700 sq ft representing 7.3% of total floor space in the market. Grade A space dominates supply, accounting for more than two thirds of space.
⊲ Prime rents in St James’s remained at £115.00 per sq ft in the second quarter of the year, bolstered by the good levels of activity seen. However, the higher levels of availability on the market has weighed on rents of refurbished space, with values falling back to £77.50 per sq ft, levels last seen in 2013/14.
⊲ The Crown Estate’s The Marq, 35,000 sq ft new build is commanding a high level of interest with the majority of the floor under offer strong rental levels.
⊲ Take up in Marylebone moved back to trend levels of activity in Q2 2019, with 95,750 sq ft of space let but due to the weak first quarter, take up at the half year is significantly down on the same time last year. A total of 132,361 sq ft of space was acquired in the first six months of 2019 across 56 transactions.
⊲ The letting of the recently refurbished Seymour Mews House was the highlight of the second quarter, with the entire 15,876 sq ft building let to a single tenant. Primary activity in the Marylebone market was focused on un refurbished space, which accounted for 45% of activity in Q2.
⊲ Supply continues to be the main constraint on the Marylebone market, with ready to occupy availability down to 216,600 sq ft at the end of Q2 2019, a decline of 38% since the end of 2018. Grade A supply currently stands at 65,830 sq ft, with only 43,000 sq ft of new space currently being developed at Native Land’s Regent House, 136 George Street. Completion is due in 2020.
⊲ Prime rents moved back to £90.00 per sq ft in Q2 2019, recovering the ground lost in the first three months of the year. Rents on un refurbished space were the main beneficiary of the strong period od take up in Q2, moving to a new peak of £62.50 per sq ft.
⊲ Take up in Noho has dropped back significantly in the first six months of 2019 following two strong years of activity. Take up in the first six months of 2019 has totalled 198,140 sq ft across 66 transactions. Activity in the two previous years was supported by strong period of pre let activity on Grade A space, as a number of new buildings came to the market.
⊲ The largest transaction in Q2 2019 was the 21,100 sq ft letting to the Cleveland Clinic at 24 Portland Place. Activity has remained focused on mid sized and smaller lettings, with Take up of units of 10,000 sq ft and below accounting for 70% of year to date transactions.
⊲ Overall supply has remained stable around the end 2018 figure over the past six months but there has been a significant change in the components of availability. Grade A and refurbished supply has reduced by 20% to 243,000 sq ft, whist the availability of Grade C stock has increased by 41% to 121,000 sq ft.
⊲ As a consequence of the changes in supply, both prime rents and rents on refurbished stock have £82.50 per sq ft and £62.50 per sq ft respectively. Rental values on un refurbished space have remained at £52.50 per sq ft over the past quarter but may be set to ease over the remainder of the year.
⊲ Soho is one of only two of the ‘core’ West End markets to see take up in the first six months of the year remain above trend rates of activity. Take up in the first six months of the year has been 228,400 sq ft across 42 transactions.
⊲ Take up in the second quarter was boosted by largest deal in the ‘core’ West End markets in Q2, the 102,600 sq ft pre let to G Research at Derwent London’s new development above the new Tottenham Court Road station, Soho Place.
⊲ Supply in Soho has remained close to its four year low point, with 307,600 sq ft currently on the market. Grade A supply accounts for 47% of the overall total in the Soho market, although the marketing of the remaining 106,400 sq ft at Soho Place should boost activity over the coming months. The development is due to complete in 2022.
⊲ Rents on Grade A and refurbished stock have regained ground lost since mid 2018, with prime rents back to £87.50 per sq ft, whilst rents on refurbished stock are back to levels last seen in late 2017, £75.00 per sq ft.
⊲ Take up in the Covent Garden market has fallen below trend rates of activity in H1 2019, with a total of 149,420 sq ft of space let across 36 transactions. The take up of Grade A space has fallen significantly, with less than 10,000 sq ft of Grade A space letting in the first six months, although this should change in the second half of the year, with the final 88,500 sq ft at the Post Building let to Nationwide.
⊲ The largest transaction in the year to date has been the 20,675 sq ft letting to tech group Comply Advantage at 90 Long Arce, who were represented by BDG Sparkes Porter. This is the only deal above 20,000 sq ft to complete in H1 2019.
⊲ The sharp downturn in supply seen over 2018 has been halted in the first half of 2019, as availability edged up to 400,000 sq ft, with 50% of stock on the market in Grade A space. If the Post Building lettings completed, the dynamics of supply will alter significantly, with only 31,200 sq ft of tech space due to complete at The Outernet on the junction of Charing Cross Road and Denmark Street.
⊲ Prime rents in Covent Garden registered the strongest growth in the ‘core’ West End markets over the quarter, moving back up to £80.00 per sq ft, levels last seen in the latter stages of 2017. Rents on un refurbished stock slipped to £52.50 per sq ft as supply in this sector of the market edged up.
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