Docklands and Stratford Market Update - Q3 2019

By the end of the third quarter take-up had totalled 382,068 sq ft, 19% above the long-term average and the second highest Q3 take-up in the last 10 years. 

Docklands & Stratford office market balance

Following EBRD’s transaction in Q2, it could be have been perceived levels would have fallen below average, however, WeWork acquired a sub-lease from the EMA totalling circa 283,000 sq ft at 30 Churchill Place and in Stratford the HMRC signed a pre-let at 14 Westfield Avenue totalling 58,500 sq ft on a 25 year lease. 

Docklands & Stratford office take-up 

So far this year, we have seen just under 1.1 million sq ft of take-up, on-par with the same period last year, there is a further 203,000 sq ft under offer in the Docklands and Stratford market. Should this all complete by the end of the year, take-up will have exceeded the long-term average by 36%. 

Unsurprisingly, it was the flexible office sector that was the most active during the quarter, accounting for 74% of total take-up, followed by the public sector with 15%. However, it is still the financial sector who have acquired the majority of stock over the last 12 months totalling 373,000 sq which equates to 35% of take-up. 

Looking at active requirements in this market, levels of demand are still well above average despite falling marginally quarter-on-quarter from 777,000 sq ft in Q2 to 764,000 sq ft. Furthermore, we are tracking a number of occupiers currently located in other submarkets across London who are actively considering the Docklands and Stratford as part of their wider search.

Supply in Docklands and Stratford totalled 2.4 million sq ft, increasing 12% on the previous quarter and 51% above the long-term average. We do believe supply has now peaked and levels are likely to fall over the next 12 months as occupier seeking Grade A stock at competitive rents consider this market for their next occupation. 

Docklands & Stratford office availability

There is a total of 777,000 sq ft of new and refurbished stock available in this market, with just five options in the Docklands market that could offer and occupier over 100,000 sq ft.  These include the Import & Export Buildings (R1 & R2) Republic, Altitude, Royal Albert Dock, 15, Westferry Circus and Here East. In Stratford supply also remains limited, with just over 226,000 sq ft available on the market. The current vacancy rate is now 11.3% for the whole Docklands market, with Canary Wharf at 9.2%.

Despite the seemingly high vacancy rates when compared to other submarkets in London, future supply remains tight. Looking at the development pipeline, there is close to 905,000 sq ft of office space under construction due to complete by the end of 2023. However, approximately 16% of this is already either pre-let, or under offer. 

Docklands & Stratford development pipeline

There is just over 552,000 sq ft due to complete next year, all of which is currently untenanted. This includes 20 Water Street, Wood Wharf totalling 211,000 sq ft and Cargo, 25 North Colonnade totalling 341,000 sq ft. 

The prime headline rent remained stable across the Docklands market at £49.50 per sq ft in Canary Wharf, Stratford stable at £44.00 per sq ft and the Rest of Docklands at £32.50 per sq ft. The recent strong demand we are recording in this market, coupled with the availability of larger lot sizes means occupiers from other parts of London are giving serious consideration to the Docklands as a viable alternative, which is underpinning our rental expectations. 

There were no investment transactions during the third quarter of the year. The supply of investment stock is extremely limited, with just two assets available in Canary Wharf, one of which is already under offer. There are a further two assets on the market in Stratford, with a number of opportunities available at International Quarter London, E20

* It should be noted that levels of take-up and supply can be effected considerably from a single large transaction completing from one quarter to the next.