City and City Fringe Letting Market

In the run up to Britain’s ‘divorce;’ with Europe, now extended to 31st October 2019, City office demand remains strong for both the City core and City fringes

Whilst there has been continued uncertainty over the economy with Brexit now extended to 31st October 2019, City office demand remains strong for both the City core and City fringes.

Employment remains high although growth is likely to reduce over the next few years with reduced corporate expansions and consolidation. Outside of London manufacturing and retail employment has been hit hard in recent months.

The global drive to develop ‘Artificial Intelligence’ a skillset routed in the emerging companies based in the City fringes continues to lead to further demand from the technical and media industries.

Speculative development finance has been restricted in the past 2 years which has reduced new development completions and led to a reduced supply pipeline for 2019 and 2020.

The City core market started slowly with very few large transactions taking place in January and February 2019. The largest deals which did take place were Bulb, an extraction and utility company growing from just 10,000 sq ft in the last few years, acquiring 76,000 sq ft at 155 Bishopsgate, and Philip Morris who acquired 48,000 sq ft in 1 New Change at £61 per sqft. A strong finish to the Quarter has been witnessed by the signing of Peel Hunt for 41,000 sq ft (advised by Allsop) and Millbank Tweed for 70,000 sq ft at 100 Liverpool Street. We Work also continued its expansion in the City Core for its HQ concept taking 34,000 sqft at Dixon House, 1 Lloyds Avenue (Allsop advised MAPFRE), together with 12 Moorgate, Minster Court and 40 Mitre Square, all in the last month.

Total take up for the quarter was 1.2M sq ft, down on Q4 2018 which stood at 1.8M sq ft and the long term average of 1.4M sq ft. 39% of take up was for new Grade A stock.

Take up in the second quarter is expected to increase due to the significant number of occupational enquiries, demand and under offers. These include Quilter, 100,000 sq ft under offer at Senator, Smith and Williamson, 80,000 sq ft under offer at Gresham St Pauls, and BT rumoured to have shortlisted 1 Braham Street for up to 200,000 sq ft.

Supply in the City currently stands at 6M sq ft approximately 6% down on the 5 year average of 6.45M sq ft. The vacancy rate for the City is 4.4% with Grade A stock as low as 2.2%.

The development pipeline remains extremely low for 2019/2020 and many occupiers are finding it challenging to secure good quality sub 10,000 sq ft space in the City core.

Shoreditch and the City Fringe supply remains extremely tight with vacancy rates of sub 4.0% and Grade A stock below 3.0%.

We have witnessed further record breaking rents in Shoreditch and the City fringe with Travelex paying £83.50 psf on the 17th floor of The Bower and Tradedesk placing 3 floors under offer at Bartholomew Close in the City in the low £80’s per sqft.

Pre-lets are taking place for refurbished stock in the late £60’s per sqft for mid level floors close to Old Street roundabout. Ebiquity is currently under offer to secure the upper floors of Chapter House and Totally Money has recently signed on the first floor at £67.50 per sqft for 7,500 sq ft.