European Office Markets Update

A recent report by CBRE on Europe’s office markets highlighted Madrid’s first quarter take-up was just under 100,000 sq m (1.1m sq ft) which was a major improvement on other recent first quarters. Analyst believe that demand is being driven by occupiers taking advantage of low rents in prime central locations with many small and mid-size deals recorded.

In Paris there were two office deals of 40,000 sq m (430,000 sq ft) each, together with a surge of HQ consolidation projects, taking the French capital’s take-up to 506,000 sq m (5.4m sq ft), a substantial improvement on recent quarters.

In London, rents increased, including the West End recording a 5% prime rent increase to £105 per sq ft per annum in the first quarter of the year.

Amsterdam and Munich also saw rents increases of 1.5% each over the same period, with both cities experiencing demand for grade A quality buildings. As a result, Munich has just 35,000 sq m of space available in the city centre with prime rents to stand 5% higher than 12 months ago at €33 per sq m per month.

In Barcelona, two large transactions of 9,000 sq m and 13,000 sq m boosted the market and the number of office deals per quarter is reaching 300.

In Dublin, there have recently been large office deals involving Facebook (11,000 sq m ), Deutsche Bank (10,200 sq m), Susquehannah (9,600 sq m) and William Fry (9,000 sq m).

This trend is not confined to the West of Europe with the Scandinavian cities of Oslo and Stockholm both recording prime rental growth of 5.2% and 2.3% respectively over the same period.

Metropolis has a large archive of European office deals

London Lettings On The Rise

Central London office lettings in June 2014 reached 1,150,000 sq ft in 70 medium or large deals, as the market saw another above the long term average month for office transactions.

The quarterly total was 3.4m sq ft and the first half of the year totalled 6.5m sq ft. June was characterised by large lettings to China Construction Bank and Clarksons amongst others. Financial and media sectors were strong performers. By area, the City accounted for less than 500,000 sq ft of the June deals total, however Midtown and Southbank were strong contributors. However across the quarter the EC2 area was the strongest postcode.

The strength of the Central London office market in the first half of the year is likely to translate into a full year lettings total of around 13m sq ft. There were eleven transactions over 50,000 sq ft in the quarter including  Mizuho Corporate Bank and Estee Lauder. The City accounted for 1.4m sq ft of lettings in Q2 2014 and during the last three months as a whole there were 1.9m sq ft of grade A lettings. There are a number of large lettings in the pipeline with upto 3m sq ft of space under offer. The largest space under offer is 370,000 sq ft at Bankside, SE1 to media group Omnicom.

There are currently 7-8m sq ft of active London requirements on the Metropolis database and a further 2-3m sq ft of potential requirements in the pipeline. The insurance sector is tipped as one of the most active likely to sign deals in the second half of 2014.

West End Tops the League

News that London’s West End is again the most expensive office location in the world (CBRE Global Research) will not come as a great surprise to many of the companies that Metropolis speak to every day.

The overall occupancy cost of $277 per square foot per year in the West End in Q2 2014 outstrips both Central Hong Kong, ( $241 psf), as well as Beijing’s Finance Street in 3rd. The net effect has been to drive many of the more budget conscious sectors to locations such as Hammersmith, London Midtown and Southbank, as high paying hedge funds and consultants move in

CBRE are also predicting that occupancy costs will rise again in the latter half of 2014, as a recovering economy and a lack of available space in the West End push another wave of tenants to think seriously about the economics of renewing their leases or moving elsewhere. Recent and planned moves out of the West End by companies such as Ramboll, Saatchi & Saatchi and SEI Investments underlines the trend and a large portion of the 200 companies (with 2 m sq ft of requirements) currently looking at West End space are likely to move to an adjoining area..

Southbank stokes demand

A recent office market report by Union Street Partners (Farebrother and Tuckerman) featured the rising popularity of London’s Southbank (SE1 postcode), as an office location for companies looking for good quality offices in central London. On a number of schemes, rents have reached £50 psf as a number of major office tenants compete for newly completed space.

Analysts point to demand rising in parallel with recent infrastucture improvements on the Southbank, including the newly SE1 expanded Blackfriars Station including the imminent Thameslink upgrade, as well as improvements at London Bridge in the wake of the completion of the Shard.

The local agents recorded take-up in 2013 of 1.7m sq ft including the 430,000 sq ft letting of The Gem to News International. Figures from Metropolis reveal that there has been deals totaling in excess of 800,000 sq ft for the first 6 months of 2014, including Omnicom’s 340,000 sq ft potential deal at Bankside 2 & 3 in SE1. Other large recent deals in the area have included lettings to General Healthcare (HCA), Charles Tyrwhitt and Ramboll.

A raft of companies have also recently completed deals on the just-completed 240 Blackfriars Road scheme. Cushman & Wakefield have analysed recent office locations between London districts and concluded that Southbank is now the second most popular area to relocate to, after City core. Media and tech companies are the most likely to move office districts.

Metropolis is currently monitoring 50 companies which include Southbank in their search area, including: Intelligent Environments, Eurostaff Group and NSC Global Solutions among many others. If all searches are seen through to successful conclusion this will lead to over 500,000 sq ft of future lettings.

Looking ahead, there are a number of new office developments either underway or planned, such as the 37,160 sq m (400,000 sq ft) King’s Reach Tower, Stamford Street, 100 Union Street and 3 Albert Embankment, which will see a new influx of tenants moving to London Southbank.

Digital office demand

A recent report from Jones Lang LaSalle (JLL) argues that the upsurge of businesses from the digital and media sectors looking for office space in the EC1 area of London, means that this area can no longer be considered “fringe” in the context of London rents and office developments.

The Government’s “East London Tech City” initiative to promote Silicon Roundabout’s profile is increasing the global spotlight on the area. ‘Tech City’ encompasses the Shoreditch, Hoxton and Old Street areas of London. Technology firms have been one of the first sectors to take advantage of the improving UK economy and London is viewed as the best location for access to investors, drawing companies in

In terms of subsequent demand for office property this is a trend being tracked at Metropolis, with over 60 current local search requirements listed on the database, including office occupiers such as NeueHouse, Vodafone and Microsoft. In addition, there are a further 50 companies which have expansion plans or arDigitale approaching lease expiries in the area which will lead to property decisions.

Meanwhile, average office rents have risen from £17.20 per square foot to £33.60 in 2013 in the Shoreditch to Hoxton districts, according to Cushman Wakefield, which has led to a pricing out of some of the smaller start-ups in favour of the bigger companies. Start-ups such as and say they moved away from the area due to surging rents. So the growth of the area has led to movement in both directions.

Mainstream developers are homing in on Silicon Roundabout, with schemes including Derwent London’s White Collar Factory and Helical Bar’s 207-211 Old Street scheme in the pipeline for 2015 – 2016. There is around 1 million sq ft of speculative space either under construction or with planning permission.

Looking ahead, some of the fastest growing digital companies in London include: Fixnetix, Leadpoint, Mimecast, Quickstart Global, Monitise, Forward Internet, Grove Group, Media Ingenuity, Translate Media and The Foundry. Metropolis is currently talking to many of these firms over their future property requirements.

London Offices May 2014

Central London office lettings in May 2014 reached 1.37m sq ft in 50 deals, driven by the signing of some large deals. The May figure puts 2014 back on target for 12m sq ft of medium/large office deals for the year.

The largest letting was M&G’s decision to pre-let 322,000 sq ft of office space in the City, as well as Mizuho taking 192,000 sq ft at 2 Ludgate, EC4 and Estee Lauder signing for 140,000 sq ft at Fitzroy Place in W1

The City again led the way with over 500,000 sq ft of office deals, backed by 120,000 sq ft of Docklands deals ans a strong showing in London, SE1. The West End, helped by the Estee Lauder pre-let, accounted for over 300,000 sq ft of transactions.

Financial services led the take-up by sector in the month, followed business services and retail related companies.

A rise in new requirements, particularly by medium sized companies in the City of London is likely to feed through to more deals in future months. Metropolis is currently tracking around 7m sq ft of active central London searches.

Manchester – Some Years Are Bigger Than Others

A recent report by Savills on the Manchester office market highlighted an increase in office take-up in Q1 2014. Office space transacted in Manchester rose from 215,000 sq ft in the last 3 months of 2013 to 317,000 sq ft in the first quarter of 2014 in 69 deals. Metropolis looks at recent deals and future forecasts.


Barclays took 80,000 sq ft at Carlyle’s 4 Piccadilly Place scheme and Trader Media took 60,000 sq ft at Ask Development’s No1 First Street. Costain, the construction group, identified new regional office space of 3,437 sq m (37,000 sq ft) to relocate to at Goodman’s 1500 Aviator Way on Manchester Business Park. While Emirates Airways took 2,323 sq m (25,000 sq ft) at Goodman’s Building 1000, also on Manchester Business Park.

Despite the large deals it is the smaller, often sub-5,000 sq ft, moves in Manchester, which make up the majority of the market activity. Local agents put this down to a two tier office market, which includes a large amount of second hand available office stock, whereas newly built or refurbished grade a stock is in short supply.

The Manchester office market is split by local agents into five areas:

  • Core
  • Spinningfields
  • Piccadilly
  • NOMA/Victoria
  • St Peters Square

Manchester’s national and international profile has enabled it to register around 1m sq ft of take-up every year. Local agents believe that there is close to 800,000 sq ft of requirements in the market in Manchester. Metropolis is currently tracking over 40 Manchester searches by local and national companies including PWC, Ticketmaster and Age Concern. If the current pace of lettings is maintained the office take-up total for 2014 could again top 1 million sq ft.


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