A busy summer month as August take-up reaches a six-year high
In contrast with the typical summer lull in activity we have seen over recent years, leasing activity in August reached 385,463 sq ft. This was the highest monthly take-up for August since 2016, when take-up reached 392,000 sq ft, with sub-10,000 sq ft transactions continuing to drive market activity despite growing uncertainty. Overall, sub-10,000 sq ft transactions accounted for 77% of completions last month, and only one transaction over 25,000 sq ft completed in August.
Overall, 43 transactions completed during the month, the second highest number of monthly transactions to complete since the start of the pandemic. This was also the highest volume we have seen outside of a December month since October 2018.
The largest transaction to complete in August and the first Serviced Office Provider transactions so far this year in the West End was Landmark Space’s pre-let of the part 1st and part 2nd floors, 34,921 sq ft, at Orchard Place, 8–10 Broadway, SW1, on a ten-year lease at £75.00 per sq ft.
We also saw the two other Serviced Office Providers acquire space last month, with X+Why acquiring the 2nd, 3rd and 8th floors, 22,150 sq ft on a management agreement, at 1 Great Cumberland Place, W1, and Huckletree acquiring the 4th and 5th floors (20,763 sq ft) at Jubilee House, 213 Oxford Street, W1.
Financial sector occupiers continue to be a significant driver of leasing activity and accounted for 30% of August’s take-up – in line with the proportion of year-to-date take-up, the Insurance and Financial sector as a whole has accounted for (32%). The Tech & Media sector follows with 25% share of annual take-up followed by the Manufacturing & Industry sector with 14%.
Despite rising cost pressures, occupational demand continues to remain strong. At present, there is almost 1.5m sq ft under offer in the West End, up 26% on the long-term average. The largest space under offer to a single occupier is Audley Property Management, CO-RE’s Lansdowne House, Berkeley Square, W1 scheme, where over 200,000 sq ft is currently under offer to Blackstone and expected to exchange this year.
In addition to the high volume of space under offer, active Central London requirements, (excluding any city-specific requirements), stood at 5.3m sq ft, up 20% on the five-year average. We are set to see a continuation of the strong levels of demand we have seen from the Insurance and Financial sector over the coming year, with the sector accounting for over a third (35%) of active demand by sq ft.
As a result of the sustained appetite we have seen from occupiers for best-in-class space, the average prime rent for the year so far currently stands at £122.70 per sq ft, up 3% on the same period during 2021. The average Grade A rent for this year so far currently stands at £81.49 per sq ft, up 2% on the previous year.
We saw an increase to availability during the month, with supply at the end of August standing at 6.9m sq ft. This takes the overall vacancy rate to 5.9%, up 30 bps on the previous month. Whilst overall supply has slightly increased, the proportion that is tenant-controlled remains at 19%.
We are currently anticipating development completions over the next four years will reach 11.9m sq ft, with a record 3.96m sq ft set to be delivered in 2023.
Analysis close up
In Focus – Mayfair
We have continued to see strong levels of demand across core West End sub-markets, including in Mayfair, where take-up is at its highest level for this point in the year in four years, with 303,615 sq ft completing this year. In addition, we have seen 47 transactions complete in Mayfair this year, which is the highest number of transactions to complete in any West End sub-market.
At present, space under offer currently stands at 353,000 sq ft, up 128% on the five-year average for this sub-market – 92% of this is of Grade A standard.
Availability at the end of August in Mayfair stood at 554,500 sq ft, which equates to a vacancy rate of 4.4%. This is the lowest level of supply we have seen in this sub-market since Q4 2019.
The average prime rent achieved so far this year currently stands at £123.33 per sq ft, up 3% on 2021 – the average Grade A rent achieved is at £100.15 per sq ft, in line with the average achieved over the same period in 2021.