WEST END OFFICES
SUB MARKETS RESEARCH

WEST END OFFICE MARKET

COMMENTARY

Take up in the ‘core’ West End markets got off to a slow start in Q1 2019, with only 457,050 sq ft of floor space acquired across 138 transactions. This compares to the 10 year average of 725,000 sq ft per quarter and 193 transactions.

There was a general lack of larger transactions in the ‘core’ markets in Q1 2019, with most larger deals focusing on the greater availability in some of the fringe West End locations. Five transactions above 30,000 sq ft totalling 313,000 sq ft completed in fringe West End locations in Q1 2019, with only one transaction, the 53,920 sq ft pre let to Glencore at 18-19 Hanover Square completing in the ‘core’ locations.

Supply remained stable at just under 2.5m sq ft, although ready to occupy Grade A supply continued to tighten and now stands at just over 1m sq ft. The St James’s and Mayfair markets continue to offer the best supply of Grade A stock, with 314,300 sq ft and 210,837 sq ft respectively on the market at the end of Q1 2019. These two markets account for 51% of Grade A space across the ‘core’ West End markets.

Whilst there have been varying trends in prime and refurbished rents across the ‘core’ West End sub markets, rental values on unrefurbished space have increased in most locations, with the average growth over the quarter being 4.4%. St James’s registered the strongest growth in unrefurbished rents, with values rising by 8.3%.

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MAYFAIR OFFICE MARKET

COMMENTARY

Transaction levels slowed significantly in Q1 2019, with only 32 deals completing, compared to 66 in the same quarter last year. Despite the slowing in the number of deals completed, take up remained relatively robust with several larger lettings boosting the total for the quarter, which stood at 148,100 sq ft.

The largest transaction in Q1 2019 was the 53,916 sq ft pre let to mining group Glencore at Great Portland Estates 18-19 Hanover Square development, which is due to complete in Q3 2020. The 165,500 sq ft of offices at the new scheme, which sits above the new Elizabeth Line station at Bond Street, are now two thirds let.

Supply edged up above 600,000 sq ft in the first three months of the year, due to an increase in Grade B and C space, whilst the supply of Grade A space continued to tighten. The availability rate in Mayfair now stands at 4.8%, up from 4.2% at the end of 2018.

Prime rents in Mayfair edged down to £107.50 per sq ft, their lowest level since 2013. Prime rents are now 20.4% below their peak 2015 levels. Refurbished rents also eased back to £80.00 per sq ft, down 11.1% from peak levels.

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ST JAMES’S OFFICE MARKET

COMMENTARY

Take up in Q1 2019 remained broadly in line with the 10 year average for the St James’s market, with 52,700 sq ft of lettings completing across 13 deals. St James’s has remained one of the more buoyant amongst the ‘core’ West End markets over the past five years, due to a ready supply of Grade A space.

Several transactions boosted activity in the first three months of the year, the largest being the 13,653 sq ft letting to Shore Capital at Cassini House, 57 St James’s Street, whilst Exodus Point took 13,136 sq ft at WELPUT’s 20 St James’s Street at a rent of circa £120.00 per sq ft.

Supply fell back to 432,400 sq ft at the end of Q1 2019 although the supply of Grade A space remains one of the strongest amongst the West End sub markets. More than 72% (314,000 sq ft) of current availability is Grade A. Almost 40% of Grade A supply is at One Jermyn Street, where 120,000 sq ft is available. Other significant availability includes The Crown Estate’s 35,000 sq ft Marq, Duke Street, for which there is rumoured to be significant interest.

Prime rents in St James’s moved back up to £115.00 per sq ft in Q1 2019 as activity continues to be focused on Grade A space, which has accounted for almost 60% of take up in the past three years. Rents on unrefurbished space also moved back to previous peaks of £65.00 per sq ft, growth of 8.3% on the quarter.

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MARYLEBONE OFFICE MARKET

COMMENTARY

Take up in Marylebone has been held back by shortages in supply over the past few years, with availability amongst the lowest of the ‘core’ West End markets. The start of 2019 has seen a slow start to the year, with only 30,020 sq ft of lettings completing, across 18 transactions. No lettings above 3,500 sq ft were completed in the first three months of the year.

Supply remained stable at 359,400 sq ft representing an availability rate of only 3.8%. Grade A supply increased in the early part of 2019, with the refurbishment of the 15,876 sq ft Seymour Mews House completing shortly after the end of Q1. The entire building is currently under offer, with completion expected in the second quarter.

Grade B and C stock remains the main element of supply in the Marylebone market, accounting for two thirds of overall stock on the market. The largest building currently on the market is the 33,400 sq ft 151 Marylebone Road.

Prime rents moved back down to £85.00 per sq ft in Q1 2019 but rents on both refurbished and unrefurbished space moved up as occupiers focused on these sectors of the market. Refurbished rents moved up by 3.4% over the quarter to £75.00 pe sq ft, whilst rents on unrefurbished space moved up by 4.3% to £60.00 per sq ft.

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NOHO OFFICE MARKET

COMMENTARY

Transaction levels in the Noho market fell just below the quarterly average for the past three years with 31 deals completing in Q1 2019. However, there were a lack of larger lettings during the early part of the year, with only 93,600 sq ft take up recorded.

There were only two transactions above 10,000 sq ft during the quarter, the largest being the 15,590 sq ft letting to Yext at UK House, 2 Great Titchfield Street at a headline rent of £78.50 per sq ft. Lettings of 5,000-10,000 sq ft was the most active sector in the Noho market in Q1 2019, with the most significant letting being Mayfair Capital’s acquisition of the remaining 5,116 sq ft at Great Portland Estate’s recently completed 55 Wells Street.

Supply has been significantly eroded in Noho over the past few years, falling by 42% from 662,300 sq ft at the end of 2017 to 383,940 sq ft at the end of March 2019. The most significant erosion of supply has been of Grade A space, which now stands at 105,900 sq ft, with 36% of space in the recently refurbished 30 Cleveland Street.

The tightening supply of Grade A space in Noho has seen prime rents rebound to £80.00 per sq ft, whilst rents on refurbished space have eased back to levels last seen in 2016, £60.00 per sq ft. As with most other ‘core’ West End markets, rents on unrefurbished space moved up to £52.50 per sq ft and are now 10.5% higher than they were 12 months earlier.

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SOHO OFFICE MARKET

COMMENTARY

Activity in the Soho market started slowly in Q1 2019, repeating the trend of the previous two years. Take up was 76,000 sq ft across 25 transactions, with a lack of larger lettings holding back activity.

There were only two transactions above 10,000 sq ft during the quarter, both to serviced office providers at 7-12 Noel Street.  The largest was the 11,152 sq ft letting to Knotel, with Work.Life taking 10,500 sq ft.

Supply in Soho reduced to its lowest level since 2015, falling to 305,940 sq ft at the end of Q1 2019. The reduction in Grade A supply has been the primary cause for the tightening supply conditions, with total Grade A space on the market now standing at 133,940 sq ft. More than 27% of Grade A supply is in Kinnaird House (St. James’s / Soho boundary), where 36,700 sq ft is still available.

Prime rents in Soho remained stable at £85.00 per sq ft in the first three months of the year, although rents on refurbished and unrefurbished space moved up by 3.6% and 4.5% respectively, reflecting the tightening market conditions. Refurbished rents in Soho stand at £72.50 per sq ft, whilst unrefurbished rents have moved up to £57.50 per sq ft, their highest level in the recent cycle.

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COVENT GARDEN OFFICE MARKET

COMMENTARY

Take up in the Covent Garden market was boosted by a number of larger lettings in 2018 but Q1 2019 saw a drop off in activity.

The slowing in larger lettings resulted in take up for the first quarter falling back to 56,700 sq ft, whilst transaction levels remained broadly in line with the past three years, with 19 transactions completing.

Following the sharp reduction in supply during the previous 12 months, total availability remained relatively stable at 368,920 sq ft. The balance of supply has shifted towards Grade A space, which now accounts for 50% of overall availability.

Prime rents in Covent Garden eased back once again, falling to £72.50 per sq ft at the end of Q1 2019, their lowest level since 2012. In contrast, rents on unrefurbished space moved back up to £52.50 per sq ft over the quarter as occupiers targeted economic quality space.

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Download as PDF: West End Offices Sub Markets Research