City Floor Review Q1 2016 - Gerald Eve

FLOOR REVIEW. A floor-by-floor analysis of the City office market. Q1 2016 ... deals were agreed at or above £70 per sq ft ... This sub-market has the best.
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CITY FLOOR REVIEW A floor-by-floor analysis of the City office market Q1 2016

QUARTERLY SUMMARY • • • • • •

Take-up rises 31% on the quarter Occupiers in the financial services sector account for 37% of the market Two lettings agreed over 100,000 sq ft in size Availability rises 18%, driven by new space being delivered in Q2/Q3 Prime rents rise for sixth consecutive quarter to £70 per sq ft Pre-lets continue to erode space in development pipeline

FIRST QUARTER REVIEW

THE QUARTER IN NUMBERS

Q ON Q

Y ON Y

433 floors available, totalling 2.66 million sq ft

+24% by floors (+18% by sq ft)

+16% by floors (-10% by sq ft)

244 floors taken-up during Q1, totalling 1.69 million sq ft

33% by floors (+31% by sq ft)

+4% by floors (+8% by sq ft)

148 floors under offer totalling 0.94 million sq ft

12% by floors (-3% by sq ft)

-5% by floors (-2% by sq ft)

6,940 sq ft average size of floor taken-up

7,048 sq ft

6,731 sq ft

£70 per sq ft City prime headline rents

www.geraldeve.com

£68 per sq ft

£63.50 per sq ft

COMMENT By volume, supply in the City has risen by 18% on the quarter, but is still down 10% on the year. The addition of half a million sq ft to current supply from the development pipeline, is the main driver of this increase. The amount of unrefurbished stock on the market only posted a marginal increase on the quarter. There were no real signs of pre-referendum uncertainty in the City occupational market in Q1 with volumes up 31% on the quarter. Regionally it was EC2 which drove volumes – accounting for 47% of all take-up, and sectorally, it was Financial Services which was the dominant occupying sector accounting for 37% of all take-up. The amount of space under offer rose slightly at the end of Q1. Just over a quarter of the space under offer in the City is on buildings in the development pipeline. Occupier interest in 33 Central and 1 Aylesbury Street is likely to further erode the amount of new space coming to the market in 2017. The average size of floor transacted remained high during Q1. Jeffries pre-let several large floors at 100 Bishopsgate, which helped drive up this total, but large floorplates were taken across all postcodes in Q1 as 61 floors over 10,000 sq ft in size were let. Prime headline rents increased for the sixth consecutive quarter in Q1. Several prime deals were agreed at or above £70 per sq ft during Q1 as a range of companies including asset managers, law firms and those in the technology sector agreed to pay the rents necessary to secure the best space.

TAKE-UP

Quarterly take-up by postcode and 3 year average

The letting market rebounded at the start of 2016, following a drop in activity at the end of 2015. There were seemingly no signs of occupier apprehension about the outcome of the UK referendum, as several financial services companies, including investment banks, committed to space in the City. With this said, the deals completing in Q1 are likely to have been agreed several months prior, perhaps even before the referendum date had been set.

% 2.0 1.8 1.6 1.4 1.2 1.0

The theme of more space being taken out of the development pipeline through pre-letting activity continued during Q1 as floors 7 and 8 were taken by Adobe at the White Collar Factory in EC1 (28,782 sq ft) and Jeffries pre-let floors 11-15 at 100 Bishopsgate (117,391 sq ft).

0.8 0.6 0.4 0.2 0.0 Q2 2014

EC1 EC2

Q3 2014

EC3 EC4

Q4 2014

Q1 2015

Q2 2015

Q3 2015

Q4 2015

Q1 2016

3 year average

Q1 2016 take-up by occupier sector

TMT 19%

37% Financial Services Serviced Offices 11%

Property 6%