West End Offices Sub Markets Research Q4 2018

COMMENTARY

⊲ Take up across the ‘core’ West End markets remained above the 10 year average for the second successive year, with total activity of 2.9m sq ft across 759 transactions. The take up of Grade A space slowed to just under 1.1m sq ft, down from 1.9m sq ft in 2017, due to the tightening supply in this sector of the market.

⊲ The 42% reduction in take up of Grade A space was countered by a 61% increase in the letting of refurbished and unrefurbished space, which increased to 1.8m sq ft in 2018 compared to 1.1m sq ft in the previous 12 months.

⊲ Supply has continued to tighten sharply over 2018, falling to 2.5m sq ft at the end of the year, down by 28%. The most significant reductions in supply have been seen in Noho and Covent Garden, where availability is down by 46% and 44% respectively. The Mayfair and St James’s submarkets have had conflicting fortunes, with Mayfair supply falling by 40% to 528,000 sq ft, whilst availability in St James’s is up by 41% to 547,900 sq ft. 

⊲ Grade A supply across the West End core markets is now down to 1.1m sq ft, with the largest supply of stock in the St James’s market where almost three quarters of the space on the market is Grade A . The most acute shortages of Grade A space are in the Marylebone and Noho markets.

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MAYFAIR OFFICE MARKET

COMMENTARY

⊲ Take up in the Mayfair market remained broadly in line with activity in the previous year, with a total of 736,420 sq ft acquired in 2018, across 230 deals. Activity in the final quarter of the year was hindered by a lack of larger lettings, with only two deals above 10,000 sq ft being agreed.

⊲ The largest transaction during the year remains the 42,800 sq ft letting to investment bank Houlihan Lokey at One Curzon Street in Q3. There were only three other deals above 20,000 sq ft, the 31,950 sq ft letting to London Executive Offices at Park House, the 27,220 sq ft letting to GSA Capital Partners at 5 Stratton Street and the 20,500 sq ft letting to Cerberus UK Management at 5 Savile Row. 

⊲ The take up of Grade A space fell back to 235,900 sq ft, as supply in this sector of the market has tightened. At the end of 2018, there was only 237,500 sq ft of Grade A supply, with limited options for occupiers looking for buildings able to satisfy requirements above 20,000 sq ft.

⊲ The financial services sector continues to dominate activity in the Mayfair market, accounting for 49% of take up in 2018, down from 68% in the previous 12 months. Take up by serviced office providers continued, accounting for a further 10% of the year’s activity.

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ST JAMES’S OFFICE MARKET

COMMENTARY

⊲ Take up fell back from the strong start to the year, with a total of 261,000 sq ft of lettings in 2018 in 73 transactions. The first quarter of the year saw 40% of the year’s activity, with the only letting above 20,000 sq ft completing in January, the 20,339 sq ft letting to US investment group Värde Partners at 2 St James’s Market.

⊲ This transaction was indicative of the trend throughout the year, with the financial services sector dominating activity, accounting for 80% of the years total. The second largest transaction in the year was the 19,600 sq ft letting to J.O. Hambro, at 1 St James’s Market.

⊲ Supply moved back above 500,000 sq ft during the year and ended 2018 at 547,900 sq ft, with almost three quarters of space on the market in Grade A stock. Unlike the Mayfair market, St James’s has a relatively good supply of Grade A buildings able to accommodate requirements of 20,000 sq ft and above.

⊲ Prime rents in St James’s followed Mayfair rents, falling to £110 per sq ft in the final quarter of the year. Rents on both refurbished and unrefurbished space followed suit, falling to £80 and £60 per sq ft respectively. Prime rents represent ‘good value’ when compared to their historic high, standing 18.5% below the 2015 peak.

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MARYLEBONE OFFICE MARKET

COMMENTARY

⊲ Take up in Marylebone rebounded to its highest level in four years in 2018, with 441,320 sq ft of activity, across 115 transactions. The years activity was boosted by a strong final quarter in the year, which included the years two largest transactions, the 38,100 sq ft letting to serviced office operator Landmark at 2 Portman Street, whilst digital marketing group Precis Digital took 26,650 sq ft at 1 Welbeck Street.

⊲ The increase in supply seen in 2017 has been partially reversed over the past 12 months, with total availability falling to 347,000 sq ft. Grade A supply in the Marylebone market has seen the most significant reduction, falling by 48% to 82,860 sq ft.

⊲ The availability rate in Marylebone has fallen back to 3.7%, with the most recent peak at just under 5.0% at the end of 2017. Unrefurbished space remains a significant factor in the Marylebone market, accounting for 40% of overall stock on the market.

⊲ The shortage of Grade A space in the Marylebone market has seen prime rents buck the trend of the West End market in general, moving back to their previous peak level of £90 per sq ft. Rents on refurbished space remained stable at £72.50 per sq ft, whilst unrefurbished rents moved down to £57.50 per sq ft.

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NOHO OFFICE MARKET

COMMENTARY

⊲ Noho market has been one of the strongest performing West End markets over the past five years, with a number of new schemes boosting the supply of Grade A space. This period of strong performance may be hindered over the next few years, with Grade A supply now down to 104,200 sq ft, the lowest level recorded since 2008/09.

⊲ Take up in 2018 was broadly in line with the 10 year average for the Noho market but 29% below the strong years activity in 2017. Total activity for the year was 528,900 sq ft, in 127 transactions.

⊲ The serviced office sector was particularly active in the Noho market during the year accounting for 27% of the years total take up. The largest letting during the year was to premium workspace group Fora, who took 25,165 sq ft at 42 Berners Street. New US serviced office group Knotel were strong acquirers of space over the year taking 59,000 sq ft in five lettings.

⊲ Prime rents in Noho dropped back to levels last seen in 2014, standing at £77.50 per sq ft and now offers some of the ‘best value’ office space amongst the core West End markets. Rents on refurbished and unrefurbished space remained stable at £65 per sq ft and £50 per sq ft respectively.

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SOHO OFFICE MARKET

COMMENTARY

⊲ Take up remained above the 10 year average for the Soho market for the third successive year in 2018, with activity of 405,700 sq ft in 145 transactions. Take up of Grade A space was particularly strong, with 49% of activity focused on this sector of the market.

⊲ The largest transaction in 2018 was the 27,000 sq ft letting to Apple at 40 Argyll Street in Q2, whilst WeWork took 23,350 sq ft at 21 Soho Square in the final quarter of the year. The creative sector (DAMIT) was the most active industry acquiring space in the Soho market accounting for 33% of total activity.

⊲ Supply reduced again in 2018, with availability at the end of the year standing at 335,800 sq ft. Grade A space accounts for 49% of overall stock on the market in Soho, with the majority of this space available in three buildings in Soho Square.

⊲ Prime rents in Soho peaked at £97.50 per sq ft in early 2017 but have adjusted by -19% over the past two years, ending 2018 at £85 per sq ft, this decrease is partly due to a lack of availability of top quality Grade A space such as 30 Broadwick Street which set the peak. Rents on both refurbished and unrefurbished space have also reduced, standing at £70 per sq ft and £55 per sq ft respectively.

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Based on the above we are proud of our position as the No. 1 Mayfair Office Agent.

Further information can be obtained by contacting
a member of the office agency team.

Download as PDF: West End Offices Sub Markets Research

COVENT GARDEN OFFICE MARKET

COMMENTARY

⊲ Take up in the Covent Garden market has been boosted by several larger lettings, with total activity for the year standing at 531,700 sq ft across 71 transactions. The largest letting during the year was WeWork’s letting of the 131,500 sq ft Aviation House on Kingsway in Q2, whilst insurance group Rothesay Life took a pre let 49,200 sq ft Brockton Capital and Oxford Properties The Post Building in the final quarter of the year.

⊲ Business and professional services continued to dominate activity in the Covent Garden market, largely off the back of two large lettings to WeWork but the creative industry has become an increasingly important sector to the Covent Garden market, accounting for 24% of the years letting activity, up from 15% in 2017.

⊲ Supply has reduced over the past 12 months, falling by 44% to 365,000 sq ft at the end of 2018. Both Grade A and good quality refurbished space have seen a significant tightening in availability, although Grade A space will see a significant boost when The Post Building completes, with 88,000 sq ft still available.

⊲ Prime rents in Covent Garden have fallen back by 9.1% over the past 12 months, standing at £75 per sq ft at the end of 2018. Rents on both refurbished and unrefurbished space have also eased, standing at £62.50 per sq ft and £50 per
sq ft respectively.

TAKE UP & DEMAND

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RENTAL VALUE

Based on the above we are proud of our position as the No. 1 Mayfair Office Agent.

Further information can be obtained by contacting
a member of the office agency team.

Download as PDF: