WEST END OFFICES
SUB MARKETS RESEARCH

WEST END OFFICE MARKET

COMMENTARY

A strong Q2 and Q3 has pushed take up in the ‘core’ West End markets towards trend levels, with 2.2m sq ft of lettings recorded in the first nine months of the year in 456 transactions. The majority of which have been of Grade A space, which has accounted for 55% of take up over this period.

Take up in the current year has been typified by the number of larger transactions completed in the ‘core’ West End markets, with 10 lettings above 34,000 sq ft completing in the first three quarters of 2019 and 60% of those transactions in Q3 alone. The largest transaction in the year to date is the 125,000 sq ft pre-letting to Diageo at Turner House, Great Marlborough Street.

Supply has tightened further across the ‘core’ West End markets, falling to 2.2m sq ft at the end of Q3 2019. Grade A supply remains below 1m sq ft, with only 933,900 sq ft of ready to occupy space currently available. More than 55% of Grade a space is in the Mayfair and St James’s market.

Our new analysis of the West End market looks at occupier demand for floor space across the ‘core’ West End markets, which is estimated to stand at 3.4m sq ft at the end of September 2019. This compares to current ready to occupy supply of 2.2m sq ft. Demand is dominated by larger requirements for space with 46 requirements for buildings above 20,000 sq ft, totalling over 1.6m sq ft.

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MAYFAIR OFFICE MARKET

COMMENTARY

Total take up in the first three quarters of 2019 has been almost entirely focused on better quality accommodation, with lettings of Grade A space accounting for 61% of total activity in the Mayfair market.

Total activity in the nine months to the end of September is 376,200 sq ft, with the number of transactions down 37% on the previous year at 112. There has been a lack of larger lettings in the year to date, with only two deals above 20,000 sq ft, both being completed in Q1.

Supply remains constrained, with only 524,500 sq ft currently available and the majority of space under construction already committed. The main changes in supply over the year has been the increase in supply in suites below 5,000 sq ft (up by 25%), whilst the availability in buildings larger than 5,000 sq ft has reduced by 20%.

Prime rents in Mayfair continued to edge up due to the shortages of Grade A supply, which is now down to 250,440 sq ft. Prime rents are now back to levels last seen at the end of 2017, standing at £117.50 per sq ft. Refurbished and unrefurbished rents also moved higher on the back of the continued strong demand for space.

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ST JAMES’S OFFICE MARKET

COMMENTARY

This has been a strong year for the St James’s market, due primarily to the 51,300 sq ft letting to CinVen at 21 St Jame’s Square in Q2. Total take up in the year to date is 222,000 sq ft across 48 transactions.

Activity has been dominated by Grade A take up, which accounts for 71% of total activity, although this is primarily due to the dominance of supply by better quality space.

Supply has fallen over the first three quarters of 2019, reducing by 24% since the end of 2018 to 417,000 sq ft. The main reduction in supply has been in Grade A space, which is down by 35% to 264,800 sq ft, with 45% of this figure accounted for by McKinsey’s former offices at 1 Jermyn Street. The availability rate in St James’s remains the highest amongst the West End sub markets at 7.5%.

Rents in St James’s remained stable in Q3, with prime rents remaining at £115.00 per sq ft and refurbished and un refurbished rents at £77.50 per sq ft and £65.00 per sq ft respectively. Whilst the outlook for rents in St James’s remains positive, there may be some downward pressure on poorer quality stock.

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MARYLEBONE OFFICE MARKET

COMMENTARY

A strong Q3 in the Marylebone market pushed activity for the first three quarters of the year up to 283,740 sq ft across 72 transactions. Shortages of Grade A space has pushed occupiers towards refurbished and unrefurbished space, which accounted for 52% of total take up.

The largest transaction in Q3 and the year to date was the 83,000 sq ft pre let of Almacantar’s Marble Arch Place, where pan European private group Bridgepoint Capital took the entire office element of the mixed use scheme. The offices are due to be ready for occupation in 2020.

The Marylebone market remains one of the tightest markets amongst in the West End, with an availability rate of 3.2% at the end of Q3 2019 and total availability stands of 303,800 sq ft. Grade A supply is particularly tight, with only 50,180 sq ft of ready to occupy Grade A space currently on the market. The largest Grade A accommodations is the 9,900 sq ft at the recently refurbished 3 Cavendish Square, with retailer Celine already taking the lower floors of the building.

Prime rents moved back to £92.50 per sq ft for the first time since 2015, as the supply of Grade A space moved to its lowest level in more than 10 years. Refurbished and unrefurbished rents remained stable at £75.00 per sq ft and £62.50 per sq ft respectively, with supply in these sectors of the market remaining relatively stable.

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NOHO OFFICE MARKET

COMMENTARY

Take up in the Noho market has returned to above trend levels, with activity in the first three quarters of the year totalling 451,400 sq ft across 110 transactions. Transactions have been equally spread between Grade A space, which accounted for 50% of total activity, and refurbished and unrefurbished space.

Three larger transactions dominated activity in Q3, with serviced office providers accounting for 81,000 sq ft of activity. The Office Group took 46,230 sq ft at the former Media Village 131-151 Great Titchfield Street, whilst Fora took 34,800 sq ft at 22 Berners Street. The other major transaction was WPP taking an assignment of 43,900 sq ft from Zenith Media at The Met Building 22 Percy Street.

Availability has remained relatively stable at 366,220 sq ft over 2019, although the make up of supply has shifted significantly towards poorer quality unrefurbished stock, which has more than doubled since the start of the year. Grade A supply accounts for almost one third of space on the market, primarily due to the completion of UK & European Investments 39,100 sq ft 30 Cleveland Street.

Rents across most Grades of property in the Noho office market have remained stable in Q3 despite the strong levels of activity. The only exception to this has been in unrefurbished space, where rents have moved up to £55.00 per sq ft.

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SOHO OFFICE MARKET

COMMENTARY

The Soho market looks set to record its highest level of activity in more than 10 years, with 534,300 sq ft of take up recorded in the first nine months of the year in 66 transactions. Transaction levels are significantly below historic levels but a number of larger lettings have boosted activity.

The largest transaction in Q3 saw drinks group Diageo agreed to take the entire building at Turner House, the former headquarters of US media firm Turner Broadcasting, who are part of Warner Media. Diageo are expected to move to their new 125,000 sq ft West End base in early 2021.

Supply in Soho is now down to its lowest level in 10 years following the strong lettings market. Total availability is 237,200 sq ft, with suites below 10,000 sq ft accounting for 76% of stock on the market. The largest Grade A space on the market at the end of Q3 2019 was the 12,272 sq ft at 15 Golden Square, although 5,072 sq ft was under offer at the end of the quarter.

Prime rents in Soho remained at £87.50 per sq ft despite the strong market and the low levels of supply. If current market conditions continue, this should be expected to change over the next six to nine months. Rents on both refurbished and unrefurbished space edged up to £77.50 per sq ft and £57.50 per sq ft respectively over the quarter.

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COVENT GARDEN OFFICE MARKET

COMMENTARY

Take up in the Covent Garden market has fallen back from the peak levels of 2017/18 due in some part to the reduction in supply over the past few years. Total activity in the first three quarters of 2019 was 273,410 sq ft in 48 transactions.

The third quarter has been the strongest period during the year, with the letting of the final 91,000 sq ft at The Post Building, 21 New Oxford Street to Nationwide boosting activity. Nationwide are to base its new digital and technology innovation centre at the building.

Supply has edged slightly lower over the past nine months following the sharp reduction seen in 2018. Grade A supply has been boosted to 166,100 sq ft by the completions of two new schemes, with One Smarts Place adding 33,495 sq ft to supply and 7,524 sq ft still available at The Arbour, 143 Long Acre.

Prime rents in Covent Garden remained stable in Q3 2019 at £80.00 per sq ft, with supply of Grade A stock up significantly since the end of 2018. The supply of refurbished and unrefurbished space has tightened significantly over this year, causing rents to move up to £65.00 per sq ft and £52.50 per sq ft respectively.

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Further information can be obtained by contacting
a member of the office agency team.

Download as PDF: West End Offices Sub Markets Research