Take-up in the City increased from 350,000 sq ft in Q2 2020 to 416,000 sq ft in Q3. Nevertheless, this was still the third lowest quarterly total in the last decade, and was 53% below the 10-year average. The largest deal during the quarter was Baker & McKenzie taking 153,000 sq ft at 280 Bishopsgate, EC2 meaning that for the third quarter in a row a legal deal has been the biggest of the quarter. This deal helped make July the strongest month with 65% of the quarter’s activity.
After a dip in August, activity greatly picked up in September primarily due to two deals in East City with non-traditional occupiers. These were Storey taking 45,100 sq ft at 100 Liverpool Street and Northeastern University taking 38,600 sq ft at Devon House, St Katharine Docks, E1. The only other deal above 20,000 sq ft was Amundi taking 27,700 sq ft across three floors at 77 Coleman Street, EC2. Professional Services was the most active sector accounting for 46% of take-up followed by Financial Services with 21%. After three consecutive quarters of declining take-up by serviced office operators (with no activity in Q2) they accounted for 11% of Q3 take-up. In contrast, the TMT & Creative sector was relatively quiet this quarter.
Availability in the City has increased for a fourth consecutive quarter and is now 5 million sq ft. This has led to an increase in the vacancy rate from 6.5% to 6.7%. Despite the increase in available space, availability remains below the 10-year average of 5.1 million sq ft. Whilst we have seen an increase in the amount of tenant offered space, this is still at relatively low levels for now.
The development pipeline for the City totals 7.3 million sq ft, with 32% of this space currently pre-let. 1.3 million sq ft has completed so far this year, with a further 2.5 million sq ft scheduled for completion during the final quarter. Of this, 38% has been pre-let, leaving 1.4 million sq ft available. Looking further ahead, 25% of the 4.8 million sq ft of development in the City pipeline between 2021 and 2023 has already been pre-let.
The largest space still to complete in 2020 is 22 Bishopsgate, EC2, which is now 63% pre-let. Slightly longer term, there is 880,000 sq ft available at Gotham City, 40 Leadenhall Street, EC3, due for completion in Q1 2023 and there are rumoured to be a number of pre-lets in discussion here.
Prime rents have remained stable in the City for Q3 2020 at £72.50 and £90.00 for a tower floor. Rent free periods have edged up to 25 months, the first increase since Q3 2017. MSCI’s rental growth index for the City contracted by 0.2% in the three months to September 2020.
TOP TENANT SECTORS
KEY STATS THIS QUARTER
TAKE-UP FOR Q3
415,700 sq ft
52.3% down on the 10-year quarterly average
7.3 million sq ft
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