Over half (591,000 sq ft / 58%) of take-up in July was for pre-let deals across five transactions in the City. The largest pre-let deal in July, and of the year so far, saw BT Group pre-let the whole of One Braham Street, E1 equating to 328,011 sq ft on a 15-year lease.
The Insurance & Financial services sector accounted for 21% of take-up so far this year. However, the Serviced Office sector continues their growth across London having also accounted for 21% of take-up this year. July saw three deals to WeWork alone equating to 84,026 sq ft, and IWG pre-let the whole of 68 King William Street, EC4 equating to 78,000 sq ft, which is the third-largest deal this year to a serviced office provider.
Currently, 5.8m sq ft of new space is expected to complete next year of which 24% is pre-let, against current requirements of 10.5m sq ft. Supply will remain constrained beyond next year, with only 1.5m sq ft of speculative space scheduled to complete in 2021 and 2.3m sq ft in 2022.
Total City supply stood at 6.4 million sq ft, equating to a vacancy rate of 5%, down by 30 basis points (bps) compared to last year, resulting in average grade A rents rising 5.2% yoy to £64.99 per sq ft.
Philip Pearce, head of central London office agency team at Savills, says:
“It has been an exceptional month for take-up in the City, with strong demand and low vacancy rates continuing to put upwards pressure on rents. With a limited development pipeline, the market is expected to remain under-supplied for the foreseeable future and we predict this will result in average rental growth of 2.2% per annum for the next five years.”