Savills World Research UK Commercial City Office Market Watch February 2013 GRAPH 1 Supply and demand offer (along with Amazon being under Take-up snapshot offer on Sixty London, Genesis Oil n Take-up this month reached 238,000 remain under offer on the whole of 1 St sq ft, bringing the year-to-date total Paul’s Churchyard and Amlin are still in to 403,000 sq ft, this is 63% down on negotiations to take 111,000 sq ft at the average for the first two months of the “Cheese Grater”). year. The preference for Grade A space continues; the 76% of space transacted n By the end of February, a total of in this category during 2013 is up on the 1.1m sq ft was estimated to be under ten-year average of 58%. offer and there has been further activity at some of the City’s prime, landmark n The largest lettings this month have buildings, including Hines’s Cannon again been in the City’s insurance Place and the Heron Tower. district; Liberty Syndicates and Liberty Mutual taking 66,000 sq ft and 51,000 n Office supply in the City increased at Source: Savills Research sq ft respectively at the “Walkie- the beginning of 2013, and with 50% talkie” building. Liberty Syndicates are of February’s acquisitions being at GRAPH 2 believed to have paid around £65 per pre-completions, availability at existing sq ft and Liberty Mutual £61 per sq ft, stock remained largely unchanged this Supply with respective rent free periods falling month. 8.5m sq ft of offices are still somewhere around 33 months, and available, and vacancy rates during lease lengths believed to be 20 years. 2013 are yet to fall below 10.5%. n The highest rent reported in the City n 82% of existing supply is either this month was negotiated by legal firm new, or has been refurbished recently. Hage Aaronson. The £66 per sq ft they This means there is a variety of prime agreed to pay for 7,000 sq ft at 280 space for occupiers to choose from in High Holborn is also this year’s top rent. both core and (more affordable) fringe locations. n Units acquired tend to remain small, with the average transaction size this n Levels of demand remain relatively year falling just shy of 12,000 sq ft. subdued; requirements focussed on Central London (excluding London’s Source: Savills Research n Transactions for over 20,000 sq ft West end) are 18% down on average (of which there have been five) have at 7.2m sq ft, and requirements solely predominantly been in the core markets focussed on the City total 3.7m sq ft, of EC2 and EC3 (the single exclusion with 2.2m sq ft of those being active at being in SE1, where Al Jazeera present. completed negotiations on 28,000 sq ft at the Shard). n In the short term, this remains a good market for tenants to transact in, but n It is therefore positive that Amazon the levels of interest in buildings such have gone under offer to take as Cannon Place, the Heron Tower, the 213,000 sq ft of office space at Sixty Walbrook, One St Martin's Le Grand London (completion mid-2013). and 200 Aldersgate should also be encouraging for landlords. n To date, 12% of space expected to complete by December 2014 has been let, and a further 5% is under savills.co.uk/research 01 Market Watch | City offices Analysis close up TABLE 1 TABLE 2 Take-up Supply Month Year to date Total % Grade A % chg on Vacancy Sq ft % Grade A Sq ft % Grade A prev mnth rate (%) Jan-13 165,179 82% 165,179 82% 8,513,740 82% 9.3% 10.5% Feb-13 237,738 72% 402,917 76% 8,533,623 82% 0.2% 10.5% Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Month Year to date Month % chg m-o-m Sq ft Sq ft Number Sq ft Number Sq ft Number Sq ft Number <5,000 9,854 3 33,458 9 293,361 85 -2.1% 2.4% 5-10,000 32,652 5 106,411 15 737,287 99 11.7% 11.2% 10-15,000 10,667 1 50,975 4 730,479 59 2.8% 1.7% 15-25,000 39,772 2 39,772 2 752,730 37 -6.1% -7.5% 25-50,000 27,793 1 55,301 2 1,237,406 37 14.3% 12.1% 50-100,000 117,000 2 117,000 2 1,543,386 23 -10.4% -11.5% >100,000 0 0 0 0 3,238,974 14 0.0% 0.0% Total 237,738 14 402,917 34 8,533,623 354 0.2% 3.2% TABLE 3 TABLE 4 Rents Development pipeline Top Ave Ave rent Sq ft Let Speculative Total £ per sq ft Rent* Grade A Grade B Prime** free*** 2013 170,345 3,426,635 3,596,980 Jan-13 £57.50 £48.49 £36.67 2014 683,674 3,985,384 4,669,058 Feb-13 £66.00 £59.17 £20.00 2015 700,000 1,075,711 1,775,711 Mar-13 Total 1,554,019 8,487,730 10,041,749 Apr-13 Completions due in the next 6 months are included in the supply figures May-13 TABLE 5 Jun-13 Demand & Under Offers Jul-13 Potential demand (sq ft) 1,702,500 Aug-13 Active demand (sq ft) 5,553,000 Total demand (sq ft) 7,255,500 Sep-13 % change on long term ave -18% Oct-13 Total under offer (sq ft) 1,121,034 Nov-13 Under offer this month (sq ft) 386,722 Dec-13 Tenant controlled supply 17% * Omits confidential rents ** Average prime rents for preceding 3 months 02 *** Average rent free on leases of 10 years for preceding 3 months Market Watch | City offices Sub-market review Take-up Supply Top Rents* Last month Yr to date % Grade A Current % Grade A % ch m-o-m Month Yr to date Core 174,348 310,768 77% 6,699,380 81% 0.4% £65.00 £65.00 Fringe 63,390 92,149 73% 1,834,243 68% -0.3% £66.00 £66.00 Total 237,738 402,917 76% 8,533,623 82% 0.2% £66.00 £66.00 EC1 5,669 31,200 66% 1,050,647 67% 3.3% £55.00 EC2 36,792 118,559 71% 2,684,962 89% -1.3% £52.50 £55.50 EC3 127,667 152,905 93% 1,142,101 70% 3.2% £65.00 £65.00 EC4 9,889 33,157 38% 1,760,783 82% 3.1% £58.50 £58.50 SE1 50,617 50,617 62% 1,248,461 90% -2.6% WC1 7,104 16,479 100% 201,421 91% -5.2% £66.00 £66.00 WC2 0 0 0% 73,634 60% 0.0% E1 0 0 0% 371,614 73% -5.2% Total 237,738 402,917 76% 8,533,623 82% 0.2% £66.00 £66.00 * Omits confidential rents Significant February transactions Rent Address Floor/s Sq ft Grade achieved Rent free Tenant Lessor Liberty Canary Wharf Group/ 20 Fenchurch Street, EC3 21-23 66,000 A c.£65.00 c.33 Syndicates Land Securities Canary Wharf Group/ 20 Fenchurch Street, EC3 10-12 51,000 A c.£61.00 c.33 Liberty Mutual Land Securities The Shard, SE1 16 27,793 A Confidential Confidential Al Jazeera Sellar / Qatari Diar 60 London Wall, EC2 6 20,335 B c.£20.00 Confidential Amec ING Autonomous 1 Bartholomew Lane, EC2 2 7,736 A £52.00 25 Research Hines 280 High Holborn, WC1 7 7,104 A £66.00 Confidential Hage Aaronson Hines 110 Cannon Street, EC4 11 5,738 A £58.50 21 Operis Group USS / Moorevale 03 Market Watch | City offices Supply (over 90,000 sq ft) Address Postcode Sq ft Comments The Shard, London Bridge Street SE1 570,000 Available Cannon Place, Cannon Street EC4 389,000 140,000 sq ft under offer The Walbrook, 27-29 Walbrook EC4 337,000 Available 33 Holborn Circus EC1 327,000 Available Heron Tower, 110 Bishopsgate EC2 295,000 77,000 sq ft under offer 10 Aldermanbury EC2 275,101 52,000 sq ft under offer 1 St Martin's Le Grand EC1 248,000 31,000 sq ft under offer One London Bridge SE1 168,000 12,000 sq ft under offer 200 Aldersgate Street EC1 167,000 5,000 sq ft under offer Cottons Centre SE1 139,000 Available 199 Bishopsgate EC2 139,000 14,000 sq ft under offer Finsbury Circus House EC2 137,000 Available 99 Bishopsgate EC2 119,000 Available 66 Prescot Street E1 113,000 Available 1 Broadgate EC2 108,000 Available 8 Fenchurch Place EC3 94,000 Available Please contact us for further information Sophy Moffat Peter Thursfield Analyst - Research Director - City Agency 0207 409 8791 0207 409 8928 [email protected] [email protected] Savills plc Savills is a leading global real estate service provider listed on the London Stock Exchange. The company established in 1855, has a rich heritage with unrivalled growth. It is a company that leads rather than follows, and now has over 200 offices and associates throughout the Americas, Europe, Asia Pacific, Africa and the Middle East. This report is for general informative purposes only.