After an active Q3, take-up is expected to surpass the long-term annual average of 5.5m sq ft

Supply and demand snapshot

■ Take-up for September was 493,390 sq ft, bringing total take-up for 2017 to 4.8m sq ft, which is 20% up on this point last year, and 11% up on the long-term average take-up for the first three quarters. 80% of transactions to-date have been of a Grade A standard.

■ The 12-month rolling take-up at the end of September was 6.7m sq ft, which is 19% above the same point in 2016 and 33% up on the long-term average.

TABLE 1Key September stats

^{Source: Savills Research}

GRAPH 1City 12-month rolling take-up

^{Source: Savills Research – data accurate to end of September 2017}

■ With the 10-year average for the last quarter take-up being 1.5m sq ft, we forecast take-up will be circa 6.3m sq ft at the end of the year, this will make 2017 the fifth consecutive year to surpass the long-term average.

■ A notable transaction to complete in September saw Metro Bank acquire levels lower ground to second of 20 Old Bailey, EC4 amounting to 65,054 sq ft. The bank acquired the space on a 15-year lease and joins Barings Bank and Withers, who have already signed in the building.

■ Also in September, Mitie Group acquired 29,824 sq ft at The Shard, SE1 on level 12. They have taken the space on a 10-year lease at a confidential rent. The building is now entirely let.

■ In the year to the end of September, the Tech & Media sector accounted for the greatest proportion of take-up at 23%. This is followed by the Professional services sector at 15% and the Banking sector, largely due to the Deutsche Bank transaction at 21 Moorfields, now accounting for 13%. The Insurance & Financial services sector are next at 11%. There has been continued strong activity from Serviced Office Providers who have accounted for 6% of take-up to-date.

■ Total City supply stands at 7.5m sq ft at the end of September, equating to a vacancy rate of 6.1%, up on this point last year by 60 bps, however still down on the 10-year average by 50 bps.

■ At the end of September, there was circa 2.1m sq ft of current and future supply under-offer, which is up on the long-term average by 59%.

■ At the end of Q3, the average prime rent in the City is £73.40/sq ft, which is down on 2016 by 5%, but up on the 10-year average by 20%.

■ The average Grade A rent has only fallen on last year by 0.1% and is currently at £61.01/sq ft at the end of Q3, however it is still up on the 10-year average by 23%.

GRAPH 2City avg Grade A rent & vacancy rate

^{Source: Savills Research – data accurate to end of September 2017}

■ We have seen incentives rise on a straight 10-year lease from 19 months last year to 23 months at the end of Q3. This is the highest quarterly average since Q3 2013.

■ There is 11m sq ft of new developments and refurbishments expected to achieve PC between 2018 and 2020. However, 25% of this space is already pre-let resulting in 7.7m sq ft of speculative space being scheduled to arrive, the greatest amount being in 2019 at 4m sq ft.