Take-up 45% ahead of long term average shrinks West End office vacancy rate to 3.8% - London

04 December 2017

Strong occupier demand sees vacancy rates in the West End office market continue to fall, pushing rents on all grades of office space upwards according to Savills. The international real estate advisor says following 291,118 sq ft of office lettings in October, total take-up for the first ten months of the year reached 4.3 million sq ft, 26% above the same period in 2016 and 45% above the historic average. 

Against a backdrop of a modest development pipeline, the overall vacancy rate for the West End fell further from 3.9% in September to 3.8% in October, reports Savills, pushing average Grade A rents upwards to £83.15 per sq ft, the highest since April 2017. The average Grade B rent achieved also rose month on month to £64.73 per sq ft in October. With nearly 800,000 sq ft under offer at the end of October, Savills says it looks likely that 2017 will be the second best year on record for the leasing activity in the West End, delivering just under the five million sq ft all time record that was seen in 2007.

Hunter Booth, co-head of the West End office agency team at Savills, comments: “The balance between demand and supply in the West End remains firmly in the landlord's favour, with the current supply equating to only 11.6 months of take-up at the average rate that has been seen over the last year.  Following three years of above average demand in central London it was thought take-up would return to more normal levels in 2017 however, activity in the West End – and also the City – has defied expectation. Similarly, availability remains considerably below the long-term average as a high level of pre-letting has minimised near-term speculative deliveries. It is important to note however that occupier sentiment on the ground remains cautious in a lot of cases given wider economic uncertainty so any optimism that exists remains tentative.”

Of the deals already completed thus far, 31% of the space leased in the West End has been to businesses in the creative and technology sectors, followed by the serviced office sector at 20%.

Hunter continues: “The greatest risk to future take-up levels is any restrictions imposed on immigration which could potentially restrict London’s labour pool, resulting in skill shortages that could lead to businesses locating elsewhere. However, the fundamentals of the West End market, and the vacancy rate comparative to previous market downturns, places us in good stead to navigate any significant changes that may occur.”

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Hunter Booth

Hunter Booth

Director
Office Agency

Head Office London

+44 (0) 20 7409 8832

 

Ed Betts

Ed Betts

Director
Office Agency

Head Office London

+44 (0) 20 7758 3887