Take up in the core West End markets was revised upwards in 2023, with a total of 2.68m sq ft of space acquired, marginally below trend levels. Activity last year was boosted by a strong final quarter and this has led to a more muted level of business in the first three months of this year. Overall take up in Q1 2024 was 330,200 sq ft across 105 transactions, down from 892,700 sq ft in 148 transactions in the final quarter of last year.
There was a lack of larger deals in Q1 2024, with only two transactions above 20,000 sq ft, the 28,750 sq ft letting to Databricks at Charlotte House on Windmill Street in Fitzrovia, whilst Campbell Lutyens pre let 26,740 sq ft at Carlton House Terrace in St James’s.
The demand for space in the core West End remained relatively stable at 5.55m sq ft in Q1 2024 but there has been a significant change in the structure of requirements. Larger requirements (>20,000 sq ft) have eased slightly, probably due to the strong end to last year when just under 500,000 sq ft of space was acquired in larger deals. However, requirements for 1,000-5,000 sq ft are up by 19% at 1.33m sq ft. Despite the strong showing from the financial services sector over the past few years, demand from this sector has rebounded to 1.1m sq ft, up 19% from the previous quarter, whilst the creative sector has seen demand move to 1.25m sq ft, up 23%.
The growth in average prime rents slowed to 1.5% in the 12 months to the end of Q1 2024, down from 10.5% in Q 2023. The primary growth in rents over this period has been focused on the core markets of Mayfair and St James’s, where values are up by 3.7%, whilst all other markets have remained stable, albeit there have been some fluctuations during the year.
Supply in the core West End markets increased to the highest level since the depths of the pandemic in mid 2021 in the first three months of this year, standing at 3.44m sq ft. The past 12 months has seen availability rise by almost 1m sq ft, with a number of larger buildings coming to the market. Two newly refurbished buildings in Covent Garden (Space House and The Acre) have added 450,000 sq ft, whilst Meta’s former head office at Rathbone Square has also added 222,700 sq ft. The availability rate has move up to 6.6%, with more than two thirds of supply in Grade A space.
Take up in Mayfair slowed in Q1 2024 following the strong performance seen over the previous two years. Total activity was 102,100 sq ft in 38 transactions, with the total being below trend. Activity was held back by a lack of larger lettings, with no transactions above 20,000 sq ft during the quarter.
The two largest transactions in the quarter were both in Hill Street, with Hermes taking 15,685 sq ft at number 13, and Essar Energy took 14,790 sq ft at number 11. Whilst the financial services sector has dominated take up in Mayfair over the past 2-3 years the latest quarter saw a slowing in leasing activity by this sector, with a number of smaller lettings.
Prime rents in the Mayfair remained at £140.00 per sq ft and remain 33.3% ahead of their post pandemic low of £105.00 per sq ft in the early part of 2021. Occupiers are continuing to focus on better quality space, with limited activity in Grade B and C stock holding back rents in these sectors. Rents on Grade B space remained at £92.50 per sq ft with Grade C rents at £70.00 per sq ft.
Availability tightened in the early part of the year and now stands at the lowest level since the final quarter of 2022, falling to 563,540 sq ft. Grade A supply continues to dominate availability, accounting for 63% of all stock on the market in Mayfair, with the space in six buildings accounting for 50% of the total. The largest building on the market continues to be the 54,500 sq ft 7 Old Park Lane. The availability rate in Mayfair remains below the long run average for the market, standing at 4.5%, compare to the 10 year average of 5.9%.
Take up in the St James’s market slowed in Q1 2024, following the significant upward revisions to activity in the final quarter of last year. Transaction levels were down in the first three months of this with a total of 45,200 sq ft across ten transactions. This compares to a long run average of 70,000 sq ft across 17 transactions per quarter.
Despite the lower levels of activity, one of the largest transactions in the core West End markets was completed in St James’s in Q1, the 26,750 sq ft pre let to financial services group Campbell Lutyens at 20 Carlton House Terrace, SW1. The refurbishment of Carlton House Terrace is due to complete in Q2 2024.
Prime rents in St James’s edged back to £140.00 per sq ft in Q1 2024 as the supply of Grade A stock increased and activity levels slowed. Despite this adjustment, rents on the best space have still increased by 3.7% over the past 12 months. Rents on secondary space had adjusted ahead of prime values, with Grade B rents down to £90.00 per sq ft at the end of last year, whilst values on Grade C space moved down to £70.00 per sq ft.
Supply continued to edge up, moving above 300,000 sq ft for the first time since Q1 2022 and ending the quarter at 307,100 sq ft. The main upturn in supply has been in Grade A space, which now stands at 226,800 sq ft, with more than 85% of this space in larger buildings. The largest building on the market continues to be at 12 St James’s Square, where 60,400 sq ft is available, whilst 48,350 sq ft came to the market at Almack House, King Street, although 50% of the space was under offer at the end of the quarter.
Take up in Marylebone remained at trend levels in 2023 but has tailed off in the first three months of this year, with only 33,600 sq ft of lettings in 12 transactions in Q1. Last year’s strong showing was the third successive year of at or above trend activity in the Marylebone market, with activity driven by a strong showing from the financial services sector.
Activity in Q1 2024 was focused on deals below 10,000 sq ft, with the largest transaction being the 7,430 sq ft letting to PAM at 74 Wigmore. Only one floor of 3,673 sq ft remains available at the recently refurbished building.
Prime rents in Marylebone remained at £100.00 per sq ft in Q1 2024, slightly below the peak levels set in mid 2023 of £105.00 per sq ft. Rents on Grade B space continued to edge upwards, moving back to £80.00 per sq ft on the back of shortages of stock in this sector of the market. Grade C rents slipped back to £65.00 per sq ft for the first time in over 15 months, with tenants targeting accommodation with a higher EPC rating.
Supply rebounded in the first three months of this year, following a sharp downturn in Q4 2023. Total availability was up to 466,200 sq ft, with more than 55% of space in Grade A stock. The major addition to stock has been the completion of Beltane/Angelo Gordon’s Marylebone Place at 1 Wyndham Street, which adds 74,000 sq ft of newly refurbished space. The availability rate has edged up to 5.0% and is now above the long run average for the Marylebone market (4.2%).
Take up in Fitzrovia has remained constrained over the past 15 months, with take up in the first three months of this year down at 85,120 sq ft in 16 transactions. Activity has been dominated by the creative sector, which accounted for 31% of all lettings last year and continued to attract occupiers in the latest quarter.
The largest transaction in Q1 2024 was the 28,750 sq ft letting to artificial intelligence group Databricks, which took the whole building at Charlotte House on Windmill Street. The other major letting in the quarter was to US investment group Capstone Investment Advisors, which took 19,500 sq ft at UK House, Great Titchfield Street.
Prime rents in Fitzrovia moved back up to £95.00 per sq ft on the back of the increased supply of good quality Grade A stock on the market. Rents on Grade B space moved to a new high for the area, rising to £77.50 per sq ft and have now grown by 6.9 over the past 12 months. Grade C rents remained at £65.00 per sq ft.
Supply in Fitzrovia has increased by 232,000 sq ft over the past 12 months, rising to 724,160 sq ft at the end of Q1 2024. The most significant addition to stock over the past three months has been the placing of Meta’s former HQ building at Rathbone Square onto the market, which has added 222,700 sq ft of fully fitted space. The other major availability is at the 47,265 sq ft Met Building on Percy Street, where the podium building remains available. The availability rate remains one of the highest amongst the West End sub markets at 7.7% and is significantly above the long run average (6.3%).
Upward revisions to take up in the final quarter of last year saw activity move above trend for the second successive year. The final year figure was just under 520,000 sq ft and the buoyant final quarter has seen activity slow in the first three months of this year, with a total of 43,000 sq ft of transactions recorded in 19 deals. Activity has been driven by the financial and business/professional services sectors, which have accounted for 75% of take up over the past six months.
The largest transaction in Q1 2024 was the 9,000 sq ft letting to real estate agents Avison Young at the Liberty Building on Regent Street. In addition, managed workspace operator Metspace took 6,220 sq ft at 21-22 Warwick Street.
Prime rents in Soho have remained at £100.00 per sq ft since mid 2022 and are still below their 2017 peak of £105.00 per sq ft. Rents on Grade B and C space dropped back to £80.00 per sq ft and £67.50 per sq ft respectively, with occupiers targeting better quality space.
Supply in Soho edged higher in the second half of last year with the release of WeWorks’s former offices at Film House Wardour Street boosting the amount of stock on the market. However, availability has been significantly reduced following the strong end to last year and the modest start to this year. Overall availability stands at 487,600 sq ft at the end of Q1 2024, with 97,800 sq ft at Film House and 46,970 sq ft at Illona Rose House being the largest spaces on the market. The availability rate has come in to 6.2% but remains above the long run average (5.2%).
Letting activity in Covent Garden has remained below trend levels over the past fifteen months, with last year registering 306,200 sq ft of activity, 18% below trend and the first three months of this year seeing activity levels dip to 21,300 sq ft in 10 transactions.
There has been a lack of larger transactions over the past six months, with no lettings above 10,000 sq ft. Rothesey Life’s sub let of 44,180 sq ft at The Post Building on New Oxford Street remains the only transaction above the threshold in Q3 2023. The largest deal in the first three months of 2024 was the 5,520 sq ft letting to cloud computing group Fastly at Axa Investment Managers 1 Smarts Place.
Prime rents in Covent Garden moved up by 2.3% to £89.50 per sq ft in Q1 2024, probably prompted by the introduction of the two major refurbishments at Kingsway and Long Acre, but are still below the 2016 peak of £90.00 per sq ft. Rents on Grade B and C space have eased back in recent months, standing at £75.00 per sq ft and £60.00 per sq ft respectively.
Supply in Covent Garden increased to its highest level in more than 15 years with the introduction of 224,000 sq ft of newly refurbished space at The Acre on Long Acre. This adds to the 228,560 sq ft Space House which came to the market in Q4 2023 and bring overall supply to 894,600 sq ft. Grade A supply stands at 681,350 sq ft (76% of overall space on the market), with the two new buildings above accounting for two thirds of the figure. The availability rate in Covent Garden stands at 12.5%, well ahead of the long run average (7.4%).
Further information can be obtained by contacting a member of the office agency team.
West End Offices Sub Markets Research