WEST END FLOOR REVIEW A floor-by-floor analysis of the West End office market Q4 2015
QUARTERLY SUMMARY • • • • • •
Supply increases 15% following the addition of several developments due to complete in H1 2016 This improves the outlook for take-up in 2016 – particularly in Victoria Banking & finance was the most active occupier sector in Q4 2015 Volume of space under offer rises 45% Prime rents rise again to £125 per sq ft Positive outlook for both the banking & finance and TMT sectors in 2016
FOURTH QUARTER REVIEW
THE QUARTER IN NUMBERS
Q ON Q
Y ON Y
-10% by floors (-14% by sq ft)
The volume of space on the market rose by 15% following the addition of several developments which are due for completion in H1 2016. The combined total of all new space entering supply through the development pipeline was close to 1 million sq ft. This total includes buildings with large floorplates such as Nova South and Portland House in Victoria and The Adelphi in Covent Garden, but also smaller buildings such as 48-49 Pall Mall in St James’s.
33% by floors (-21% by sq ft)
Take-up was driven by significant relocations from the banking and finance sector in Q4, including Deutsche Bank taking 87,500 sq ft at the ‘Zig Zag’ building in Victoria and the Carlyle Group signing up to 63,500 sq ft at the St James’s Market scheme. Although WeWork let 61,500 sq ft at Fox Court on Gray’s Inn Road, and MP & Silva let 15,000 sq ft at Park House in Mayfair, it was a subdued quarter for the TMT and serviced office sectors.
26% in Q4 2014
The West End market relied on its traditional occupier base during Q4 as companies in the asset management, private equity, banking and finance sector committed to high quality space. Point72 Europe took the 7,116 sq ft first floor at 8 St James’s Square at a reported headline rent of £147.50 per sq ft, and Vision Capital Group signed up to the fifth floor at 55 St James’s Street at a reported rent of £120 per sq ft.
Deals on large floors at Park House in Mayfair, by Centrica, Coller Capital and MP & Silva, and at 2 Fitzroy Place in Fitzrovia & Bloomsbury by Lendinvest and Volterra Fietta increased activity levels on the largest floors. The largest single floor transacted during Q4 was Pret a Manger taking the 30,839 sq ft first floor at the Verde scheme in Victoria. This activity pushed the average size of deal transacted to 3,819 sq ft.
533 floors available, totalling 2.59 million sq ft
-6% by floors (+15% by sq ft)
236 floors taken-up during Q4, totalling 0.9 m sq ft
25% by floors (-36% by sq ft)
32% of take-up accounted for by the Banking & Finance sector
11% in Q3 2015
31 floors Over 10,000 sq ft in size taken-up during Q4
198 floors under offer at the end of Q4, totalling over 800,000 sq ft
122 floors (557,000 sq ft)
194 floors (704,000 sq ft)
£125 per sq ft Mayfair and St James’s prime rent
£120 per sq ft
£115 per sq ft
The amount of space under offer rose by 45% during Q4 as several smaller floors in Mayfair and several larger floors in Marylebone were put under offer. Over half of this space is either new or refurbished, with an average floor size of 4,071 sq ft as occupiers look to secure the best quality space available to them. Private equity and hedge fund occupiers continue to compete for the best space in Mayfair and St James’s and prime headline rents have increased by 10% during 2015. The shortage of occupier choice is forcing occupiers to agree pre-lets earlier and earlier in the construction process and we are seeing increased rental levels agreed.
2015 REVIEW 2015 was defined by strong demand, historically very weak levels of supply and double-digi