New figures show
City of London office rents have risen 3.5% so far this year, according to Savills latest City Office Market Watch report, compared to 2017. The average Grade A rent now stands at £62.11 per sq ft compared to £60 last year.
According to Savills, total City take-up for the year to date has now reached 1.8 million sq ft, 10% down on the same point in 2017, but 10% up on the 10-year average. Take-up for the month of April was 438,908 sq ft across 26 transactions, with an average deal size of 16,881 sq ft. Total City supply stood at 7.4 million sq ft at the end of April, equating to a vacancy rate of 5.8%.
Demand this year has been led by the insurance and financial services sector (accounting for 26% of space taken), professional services (22%) and tech & media (14%). The serviced office sector has only accounted for 7% of take-up, says Savills, but the international real estate advisor says that it expects this proportion to steadily increase over the next quarter as several deals on serviced office spaces, which are currently under offer, complete.
Philip Pearce, head of Savills central London office agency team, says: “At the start of 2018 we weren’t expecting City rents to rise this year, so growth of 3.5% is a positive sign for the market, although it may come in as the months pass, the volume of deals increases and rents become less skewed by a handful of outlying deals.
“The vacancy rate has also not risen as much as we expected it would at the start of the year, as a result of continued good levels of demand, and future schemes being pre-let. At the end of Q2, only approximately 160,000 sq ft of new space will be added to market, of which over 100,000 sq ft is already under-offer.”