UK - West End, London - Savills latest report on London's West End office space said that October take-up reached just 224,565 sq. ft., the lowest level of monthly take-up so far this year. This brings take-up for the first 10 months of 2014 to 3.4m sq. ft., in-line with take-up levels over the same period last year and ahead of the long term annual average take-up figure of 3.3m sq. ft.
They remain optimistic about take-up levels for the next two months despite the slowdown in October and are monitoring 575,100 sq. ft. of space under offer.
The on-going drift eastwards of 'traditional' West End occupiers is, however, a reason for caution and a trend to watch next year. 2013 saw approximately 1m sq. ft. of West End occupiers take additional space or relocate to the Midtown and City markets (analysis of >10,000 sq. ft. units only). So far this year, we have tracked approximately 900,000 sq. ft. of occupier drift.
Following the rise in demand from Educational Institutions for office use, the University College London's purchase of Bidborough House, 30 Mabledon Place, WC1 provided a boost to take-up figures. The property was bought for a purchase price of £25m from Camden Council.
The second largest deals occurred at 5 Howick Place, Daniel J Edelman and Informa Group took c. 20,000 sq. ft. each on the 1st and 2nd floors, respectively. The Terrace Hill (Urban & Civic) scheme is now fully let.
The vacancy rate remained at 3.4%, equating to available supply of 4.1m sq. ft., its lowest level since October 2007. Grade A supply accounts for 68%.
The top rent achieved in October was £92 per sq. f.t at 100 Pall Mall, SW1. Kohlberg Kravis Roberts (KKR) took 9,348 sq. ft. on the 2nd floor.
Savills also reported that retailers in London’s West End are increasingly expanding into office space above their existing stores in a bid to grow floor space without drastically increasing rents.
Savills reports recent examples of retailers that have been included in this trend are: Tod's, and Salvatore Ferragamo on Bond Street; ACNE, Alexander McQueen and Dover Street Market on Dover Street; and D Squared, John Varvatos and Nicole Farhi on Conduit Street.
The firm finds that by taking space above their existing store rather than securing a new shop in another West End location, retailers could be save up to £1,300 per sq ft (£13,993 per sq m) on Bond Street and £600 per sq ft (£6,458 per sq m) on Dover Street.
Oliver Green, associate director of retail at Savills, comments: "Retailers moving up into converted office space is certainly a trend we are seeing more of, especially in Mayfair where there is a long list of requirements but a lack of premium space. This move can also benefit the landlord due to attractive retail rents and the willingness of the retailer to agree longer leases to secure space.
“Depending on the individual retailer and the design on the building, the fit out of the stores can vary. In some cases brands have expanded over a number floors with a traditional open plan retail layout and in others they have opted for a more niche, private and luxury environment.”
To read the full report or to get in touch with Savills directly please go to www.savills.co.uk.