City and City Fringe Letting Market

Further positive news for the City with the expected relocation of BT to 320,000 sq ft at 1 Braham Street, which is due to sign in Q3 2019

The continued uncertainty over the economy in the shadow of Brexit and the leadership campaign is likely to create further delayed decision making to City Business’ moving into the next quarter.

Whilst there have been signs of a slowing economy and recent redundancies both nationally and within the City financial sector, in particular Deutsche Bank, we have witnessed higher levels of demand from the finance and insurance sectors over the tech and media sector this quarter. Further demand is expected from the challenger banks such as Monzo Bank (who are actively seeking 80,000 sq ft in the marketplace) amongst other new FinTech market entrants.

The largest City deals taking place this quarter were Quilter taking 100,000 sq ft at Senator, 85 Queen Victoria Street (L&G advised by Allsop) at £65.00 per sq ft on a 15 year term, Brewin Dolphin acquiring the whole of 25 Cannon Street (114,000 sq ft) at £68.00 per sq ft from Pembroke Real Estate and Smith & Williamson acquiring 85,000 sq ft at Gresham St Paul’s, 40 Gresham Street at a rent of £68.00 per sq ft.

The Serviced Office Sector has continued to thrive, accounting for 18% of market take-up. Recent lettings include Spaces (Regus) at 100 Bishopsgate taking 40,000 sq ft on levels 18 and 19 at a rent of £77.50 per sq ft and 25,000 sq ft at 15 St Helen’s Place. CBRE’s flexible workspace provider Hana has also taken approximately 40,000 sq ft at 70 St Mary Axe, with its first UK location launch. WeWork continues to expand with one of the largest acquisitions taking place this year at 30 Churchill Place with 284,000 sq ft acquired on a sublease from the European Medical Agency. WeWork is also negotiating on numerous self-contained smaller buildings to roll out its new HQ by WeWork concept, enabling growing businesses to take self-contained floors in unbranded WeWork centres.

Total take-up for Q2 remains robust and was recorded at 880,576 sq ft, only marginally down on the previous quarter and the long term 10 year average. There is further positive news for the City with the expected relocation of BT to 320,000 sq ft at 1 Braham Street, which is due to sign in Q3 2019.

Supply in the City currently stands at 6.1M sq ft with a very low vacancy rate of 4.4%, with Grade A available stock remaining very low at 2.1%.

The continued demand for space twin-tracked with the low vacancy rate across the City has resulted in rents remaining stable, with rental increases recorded in City fringe sub-markets.

Significant development completions will increase the supply pipeline for Q3 and
Q4 2019 and include 70 St Mary Axe – 159,000 sq ft, The Scalpel – 133,000 sq ft, Wenlock Works – 128,000 sq ft, Devon House – 93,000 sq ft and 30 St Mary Axe – 107,000 sq ft.

The City Fringe supply remains tight with a lack of larger (10,000 sq ft+) floorplates available in the marketplace. The Aldgate, Whitechapel and Eastern Fringe is becoming an increasingly active location with a number of major refurbishment/development completions being placed under offer close to or on completion. These include Dept W, Mile End Road (55,000 sq ft) and Wool + Tailor, Alie Street (25,000 sq ft). All of these deals achieved premium rents for their local sub-markets.

Other notable fringe market transactions include the letting of the upper floors at Chapter House, Corsham Street to Ebiquity (13,122 sq ft) at an average rent of £70.00 per sq ft and the letting of 38,565 sq ft at Arnold to Fora at a rent of £63.00 per sq ft overall on a 15 year term.

James Neville

DL +44 (0)20 7588 4433