Metropolis Office Movers October 2017

Metropolis ran 548 business leads on ‘office movers’ in the month of October 2017. If all reported moves were added together the total would exceed 8 million sq ft of office searches and transactions, researched by Metropolis’ unique market led intelligence research team. London was the largest region with 251 leads during month, but there were also strong showings from the South East (60), North West (40) and Scotland (36). IT services, professional and financial were the largest business sectors planning relocations or agreeing moves during the month.

The business leads covered the whole UK and provided details of the size of the office occupier, its likely move dates, a description of the reasons for the move, its business sector and full contact details including an address for written inquiries, at least one telephone number and in most cases an email address. Some of the largest planned moves and top picks amongst the 548 October leads, included those on Dentsu Aegis, Sumitomo Mitsui Bank, WeWork, Royal London Insurance and Dyson.

The October 2017 leads included 165 ‘identified requirements’. Which means that the company confirmed to researchers that it has current or future plans to search for alternative office space. Of these 165 searches, 100 were new office searches, not previously notified to clients.

The most recent research also included 150 ‘potential movers’ which were mainly longer-term leads on occupiers, considering a relocation, but the occupier has yet to make a final decision on whether to search.

Most of the remaining stories covered companies that have signed for new office space and have set a move date, including some large pre-lets and companies inviting tenders for fit-out contracts. The shortest planned move date is just over a month away, whilst the longest was late 2020.

Recent research by Metropolis concluded that a conservative estimate of ‘live’ business opportunities on the database in recent months exceeded £1bn of business.

If you would like some information on flexible Metropolis subscription packages, then please email Simon at simon@metroinfo.co.uk

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Cityoffices.net, the sister property leads service to Metropolis, is about to publish its ‘Autumn 2017’ survey on the office construction market in central London, with details of new schemes starting, the dozens of schemes at preparation stage and 200 office schemes in the pipeline for construction starts in 2017-2020.

For more information on Cityoffices, email Andy at andy@metroinfo.co.uk

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Thames Valley Autumn 2017

Recent research suggests that office take-up in the Thames Valley office market fell slightly in Q3 2017 to around 300,000 sq ft. of deals between July and late September. However, further pending deals amounting to over 250,000 sq ft of office space are understood to be under offer. Total take-up to the end of Q3 in 2017 is 1.25m sq ft.

The most active sectors were professional services at 20% and TMT (technology, media and telecommunications) at 19%, followed by pharmaceutical and life sciences sector, with Slough and Uxbridge as the most active towns. US-owned occupiers have around a 40% market share.

In Q3 2017, there were only five deals above 20,000 sq ft, down from nine large lettings in Q2. The largest single letting this quarter was WeWork taking 53,000 sq ft at 12 Hammersmith Grove. McAfee agreed a 19,500 sq ft move from the Bath Road to Slough town centre at the Urban Building. Fiserv signed to take 27,000 sq ft at the Porter Building in Slough, moving from Stockley Park. Some occupiers prefer to take existing space, with recent examples including: McLaren taking of 20,000 sq ft from SAB Miller in Woking and Birds Eye’s move to 40,000 sq ft of space sub-let from BP at Bedfont Lakes.

Occupier requirements have recently been driven by lease expiries, but there is emerging evidence of expansion led demand in the last two quarters.  The majority of current demand is in the sub 20,000 sq ft size band. There has been an increase in occupiers below 10,000 sq ft looking for small and flexible space.

Metropolis has confirmed nearly 150 medium/large office requirements in the Thames Valley since the beginning of 2017. Among some of the larger ‘live’ searches from at least 600,000 sq ft of new requirements in the area, include searches by: Novartis, JDA International and FCA Group. Metropolis is also tracking 140 Thames Valley companies with upcoming lease expiries, which could move in the next two years.

New Lease Research from Metropolis

The London office market has maintained steady office letting take-up during 2017. The latest figures calculated by Metropolis to the end of Q3 2017 reveal office transactions totaling 8.8m sq ft for the first nine months of the year (deals 5,000 sq ft and above). Based on these figures and a number of large office moves under offer, 12m sq ft take up by the end of the year is not out of the question. If 12m sq ft is achieved this would surpass the 11m sq ft of 2016 and match the total for 2015.

The table below breaks down take-up in London in 2017 by the five largest sectors

Sector                             % of take-up
Financial                          20%
Business Services           19%
IT/Computer                   15%
Professional                     12%
Media                                11%

Financial services leads the way, boosted by the large pre-let in the City to Deutsche Bank. Business services comes a close second helped by over 900,000 sq ft of lettings to serviced office operator WeWork. IT has been driven by large expansions by Expedia, Amazon and Spotify. By area, the City has taken around 40% of take-up, with West End, Midtown and Southbank broadly taking 15% each. Docklands has had  a very quiet 2017.

Metropolis has recorded 96 deals for London office space of 20,000 sq ft or more in so far 2017 amounting to 5m sq ft. Business services, underpinned by WeWork deals, takes over 1.2m sq ft of that, followed by 880,000 sq ft of financial sector driven by Deutsche Bank, 600,000 sq ft of IT industry deals and nearly 500,000 sq ft from professional companies (law firms, accountants, consultants). a further 2m sq ft of deals are ‘under offer’ and close to signing in Q4 2017.

Recently some office market analysts have advanced the view that the London office market for moves under 20,000 sq ft is ‘patchy’. So Metropolis went back to all the potential office occupiers contacted in 2016, approaching 2017 lease expiries, to trace what happened next.

Taking a sample from the 700 London-based occupiers contacted during 2016, Metropolis found that, despite the fact that many were simultaneously negotiating with the landlord of the existing office, over 70% of occupiers decided to move, prior to the upcoming lease expiry. The sector with the strongest propensity to move was media and the least likely to move was business services. The larger a company, the slightly higher propensity to move. West End companies were slightly more likely to move than City-based ones.

The last nine months has seen a strong pace of office space pre-lets set by incoming tenants in advance of construction completion. In total, some 4.3m sq ft of London office space, that is currently under construction, has been pre-let. Some of the high profile recent pre-lets included Boston Consulting, Metro Bank taking 67,000 sq ft of offices at 20 Old Bailey, EC4; Boston Consulting and Arup at 80 Charlotte Street, W1; HSBC taking 30,000 at Cork Street, W1 and Kings College at Roman Wall House, EC3.

The most common trigger for pre-let relocation is expansion. Nearly 50% of the space completed over the previous 6 months has now been let and includes big lettings to likes of Universal Music, Cancer Research, XTX Markets, British Council, Cleary Gottlieb, Schroders and Moneysupermarket.

Looking ahead, our research with thousands of London office tenants suggests a robust level of take-up in Q4 2017, although the increasing attractions of serviced office space and Brexit uncertainty could have an impact in the medium term.

Central London Lettings – September 2017

Central London office lettings in September 2017 reached a healthy 965,000 sq ft of deals from 61 mid-large size transactions (5,000 sq ft+) during the month. The September figure conforms to the current monthly average of just under 1m sq ft .

September was characterised by 14 office deals over 20,000 sq ft, which included Boston Consulting’s 123,000 sq ft pre-let at 80 Charlotte Street, W1, Metro Bank’s pre-let at 20 Old Bailey, EC4; Costain took 30,000 sq ft at Victoria House, WC1, and Mitie took 30,000 sq ft at The Shard, SE1.

Professional services topped the table of lettings by sector, underpinned by the Boston Consulting deal. This was followed by financial services with the large deals involving Metro Bank. Property and Business services also performed well, helped by the lettings to Costain and Mitie. Office deals ‘under offer’ in central London increased slightly at 3.6m sq ft and pending deal volumes are healthy in nearly all sub-markets.

By area, the City accounted for 33pc of the office floorspace let in September at 314,000 sq ft. The West End saw 263,000 sq ft of take-up. Midtown contributed 242,000 sq ft of lettings. Current London office demand is calculated to be around 3.1m sq ft in the City and 2.8m sq ft in the West End.

The volume of grade A (newly built or refurbished office space) let during the month reached 448,000 sq ft (46% of the monthly total), as transactions for new space resumed their recent strong showing.

Some 8.9m sq ft of offices were let in the first 3 quarters of 2017 to end of September 2017.

Metropolis research is currently monitoring 620 ‘live’ London requirements, with deals for space of up to 2m sq ft due to sign in the next few months.

Cityoffices and Metropolis are working on an analysis of lease expiries which were due to expire in 2017 and the latest London Skyline report. The update will contain details of dozens of new office schemes under construction, planning applications and consents, with scheme by scheme detail on the Cityoffices.net website. Details on Cityoffices from Andy King at andy@metroinfo.co.uk

New Movers in September

Metropolis ran 603 business leads on ‘office movers’ in the month of September 2017. If all reported moves were added together the total would exceed 13 million sq ft of office searches and transactions, researched by Metropolis’ unique market led intelligence research team. London was the largest region with 290 leads during month, but there were also strong showings from Yorkshire (60), the South East (50), North West (40) and Scotland (40). IT services, professional and financial were the largest business sectors planning relocations or agreeing moves during the month.

The business leads covered the whole UK and provided details of the size of the office occupier, its likely move dates, a description of the reasons for the move, its business sector and full contact details including an address for written inquiries, at least one telephone number and in most cases an email address. Some of the largest planned moves and top picks amongst the 603 September leads, included those on HMRC, ITV, HSBC and UCB Pharma.

The September 2017 leads included 200 ‘identified requirements’. Which means that the company confirmed to researchers that it has current or future plans to search for alternative office space. Of these 200 searches, 110 were new office searches, not previously notified to clients.

The most recent research also included 168 ‘potential movers’ which were mainly longer-term leads on occupiers, considering a relocation, but the occupier has yet to make a final decision on whether to search.

Most of the remaining stories covered companies that have signed for new office space and have set a move date, including some large pre-lets and companies inviting tenders for fit-out contracts. The shortest planned move date is just over a month away, whilst the longest was late 2020.

Recent research by Metropolis concluded that a conservative estimate of ‘live’ business opportunities on the database exceeded £1bn of business.

If you would like some information on flexible Metropolis subscription packages, then please email Simon at simon@metroinfo.co.uk

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Cityoffices.net, the sister property leads service to Metropolis, saw a further 28 stories posted in September, covering new development opportunities planning applications, consents, construction starts and development teams in London and major cities. The database now covers over 200 office schemes in the pipeline for construction starts in 2017-2020.

For more information on Cityoffices, email Andy at andy@metroinfo.co.uk

Opportunities in Serviced Offices

Colliers International has published a new report on the serviced or flexible workspace sector. Colliers outline how the workplace solutions providers have been hoovering up office space in London at a faster rate than any other sector apart from tech and media.

Flexible office providers have accounted for 18% of take-up across London during 2017 date. Central London is now home to over 7.8 million sq ft of flexible workspace from 4.5 million sq ft in 2009. This is a rise of 73% in eight years, although flexible workspace space currently only represents 4% of total London office stock.

2017 is set to deliver up to 15,000 desks by year end. Serviced office lettings appeared to have peaked at 1.4 million sq ft in 2015, however, 2017 is set to see that figure eclipsed with 1.2 million already let and a further 750,000 sq ft under offer.

WeWork has taken over 1.25 million sq ft of office space within the past 12 months. Blackstone and British Land have both begun in-house flexibile solution without leasing space to major providers like WeWork or Regus.

Paddington and City fringe, have seen increasing vacancy rates below 5,000 sq ft, and Victoria and parts of Midtown have seen void periods double in 2017. The City core has held up, but also seen activity from providers such as WeWork, Prospect Business Centres, i2, Regus and LEO.

Metropolis has researched nearly 20 specific requirements for medium/large London serviced offices in recent months. These new searches come on top of 25 recent transactions for space. Opportunities exist for agents recruiting occupiers for the large new flexible work centres, for fit-out contractors refurbishing usually previously vacant space, for furniture providers and removal firms handling the myriad moves to the new buildings.

Colliers say the need for short leases and flexible space, particularly since the Brexit vote, is driving demand for increasing volumes of flexible workspace space. Although, flexible workspace only represents 4% of London office stock, it looks set to become an important slice of the market, not just in London, but increasingly in regional cities too.

£1bn up for grabs on Metropolis

With over 6,000 office movers reported on Metropolis each year, we looked at an estimate of the total expenditure on relocation costs by these companies. Metropolis  estimate the total size of the office movers market in the UK each year.

Firstly, we looked at the average size of move. Metropolis tends to concentrate on the middle and larger end of the office relocation market, the total size of all listed office moves in the last year planned and implemented was over 80 million sq ft. Making some adjustments for updates, where company plans are updated more than once in the year, we arrived at 50m sq ft of unique office moves, both completed (space found), still deciding (potential mover) and searching (identified requirement).

We calculated an average office move size during the year of just over 8,000 sq ft. We then applied this average to a number of industry cost estimates.

Office fit-out costs can range between £15-£60 psf. If we take the most conservative estimate of £15 psf over 50m sq ft, these moves could generate £750m of expenditure on fit-out. Much more per office mover in central London.

Office agent fees, conservatively estimated at 2% of annual rent. If all 25m sq ft of office moves currently planned, but yet to take place, were considered around an average of £20 psf then office agency fees offer a potential £50m.

Furniture can also be a lucrative area for suppliers. Assuming 300,000 staff will move or be moving in the future, as part of these 6,000 office moves, if half of the companies spent a modest £500 on each employee for desk and chair this would total £75m. Of course this would be supplemented by additional furniture and some much higher expenditure at blue chip companies.

Removals can cost upwards of £10,000 for a small office and 40-50 staff. So conservatively, assuming some companies do not move, some expand into adjacent space and some move themselves, say £70m of business a year.

Cabling and IT upgrades can also provide opportunities for suppliers. Leaving aside the booming fintech sector, every company needs ever more sophisticated IT systems. With over 50m sq ft of unique moves this market can easily exceed £100m.

Other professional fees for dilapidations, consultancy and disposal costs can also provide opportunities, but these can be difficult to generalise.

In conclusion, on the most conservative estimates the potential business being signposted on metropolis is well over £1bn per year. Probably in reality over £2bn if less conservative assumptions are made.

Sources: Cushman & Wakefield Occupier Fit Out Cost Guide; http://www.getamover.co.uk; Morgan Lovell Office Relocation Checklist; Savills; Metropolis;