London Office Market in 2018

Central London office lettings in 2018 reached just over 12.3m sq ft from 554 mid-large size office transactions (5,000 sq ft+) during the year. The 2018 figure matched the 2017 London take-up total, but with slightly fewer deals.

2018 was characterised by 167 office deals over 20,000 sq ft, which were led by two large deals Facebook in Kings Cross and The Chinese Embassy at the Royal Mint; followed by a clutch of smaller, mainly pre-let deals to Sumitomo, WPP, Sidley Austin and WeWork.

IT and business services topped the table of lettings by sector, compiled by Metropolis, underpinned by the Facebook deal and the large number of lettings to serviced office operators. This was followed by financial services led by lettings to Sumitomo, BGC and TP Icap. Insurance, professional and media were also well represented. Office deals ‘under offer’ in central London remained at 3.1m sq ft, and pending deal volumes are healthy in nearly all sub-markets, with a number of deals pending.

By area, the City accounted for 43pc of the office floorspace let in 2018 at 5.3m sq ft. The West End saw 2.5m sq ft of take-up. Midtown contributed 2.4m sq ft of lettings and Docklands 900,000 sq ft. Current London office demand is calculated to be around 3.7m sq ft in the City and 3.2m sq ft in the West End.

The volume of grade A (newly built or refurbished office space) let during the year, reached a healthy 6.5m sq ft sq ft (53% of the yearly total), as transactions for new space continued their recent strong showing. Availability is dominated by secondhand space in all London markets.

Metropolis research is currently monitoring 645 ‘live’ London office requirements, with pending deals for space of up to 1.4m sq ft due to sign in the next few months.

Details on Metropolis database from Paul Ives at paul@metroinfo.co.uk

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Metropolis Movers – A 2018 Review

Metropolis ran over 6,500 business leads on ‘office movers’ in 2018. If all reported moves were added together the total would exceed 100 million sq ft of office searches and transactions, researched by Metropolis’ unique market-led intelligence research team, during the year.

London was the largest region with 2,850 business leads during the year, but there were also strong showings from the South East (710), North West (650), Yorkshire (525), Scotland (441). Financial services, IT and business services were the largest business sectors planning relocations or agreeing moves during the year.

The relocation leads geographically covered the whole UK and provided details of the size of the office occupier, company 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 2018 leads, included those on occupiers Facebook (new London HQ), AstraZeneca (Cambridge base), Chinese Embassy (new London HQ), Barclays Bank (Manchester and Glasgow campuses), WPP (new London base), Jane Street Capital, McCann Worldgroup and many, many more.

The 2018 leads included nearly 1,800 ‘identified requirements’, including 1,100 in London. Which means that the company confirmed to researchers that it has current or future plans to search for alternative office space. Of these 1,800 searches, nearly 1,200 were newly posted office searches, not previously notified to clients.

The research over the year also included 1,900 ‘potential movers.’ These were mainly longer-term leads on occupiers, considering a future relocation, but the occupier has yet to make a final decision on whether to search.

Most of the remaining stories covered companies that have just 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 2022.

Research by Metropolis during the year, concluded that a conservative estimate of ‘live’ business tender 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 Andy or Paul at andy@metroinfo.co.uk or paul@metroinfo.co.uk, mentioning ‘Metropolis Blog’

Office Market Defies Gravity

Office market reviews for 2018 suggest that he UK office market continued to defy gravity as the third and fourth quarters recorded one of the highest levels of office letting activity in the last five years.

The Central London market is seeing quarterly take-up of up to 3.5 million sq ft, the highest since 2015. The increase was boosted by a number of large transactions in new or recently refurbished space, which is accounting for two-thirds of all deals. The number of pre-lets announced in the year has broken records. Space under offer in central London currently totals nearly 3 million sq ft, suggesting year-end take-up could exceed 12 million sq ft and be the highest seen in the capital since 2015.

Regional cities are also seeing high office mover activity with almost 2 million sq ft of space acquired per quarter, the second-highest on record. Letting activity in Glasgow reached a record level, and Newcastle recently reached a 14-year quarterly high. All but one of the eight regions witnessed a quarter-on-quarter increase in take-up.

Metropolis Research reported on over 5,000 individual office moves over the course of the year, with many more occupiers poised to make decisions in 2019

London Office Market – November 2018

Central London office lettings in November 2018 reached just over 1m sq ft from 57 mid-large size office transactions (5,000 sq ft+) during the month. The November 2018 figure is in line with the current monthly London average of 1m sq ft.

November was characterised by 16 office deals over 20,000 sq ft, which were led by the Deloitte Digital’s 99,000 sq ft deal at Shoe Place, EC4 along with large deals to Starlizard in Camden; THB Group’s pre-let at 22 Bishopsgate, EC3 plus Axis Speciality and National Australia Bank at ‘The Scalpel’.

IT services topped the table of lettings by sector, compiled by Metropolis, underpinned by the Deloitte deal. This was followed by business services led by lettings to Knotel, ETC Venues and Wework. Insurance, professional and business services were also well represented. Office deals ‘under offer’ in central London remained at 3.7m sq ft, and pending deal volumes are healthy in nearly all sub-markets, with a number of deals pending.

By area, the City accounted for 48pc of the office floorspace let in November 2018 at 480,000 sq ft. The West End saw 200,000 sq ft of take-up. Midtown contributed 150,000 sq ft of lettings and Docklands 40,000 sq ft. Current London office demand is calculated to be around 3.8m sq ft in the City and 3.3m sq ft in the West End.

The volume of grade A (newly built or refurbished office space) let during the month, reached a healthy 460,000 sq ft sq ft (46% of the monthly total), as transactions for new space resumed their recent strong showing. Availability is dominated by secondhand space in all London markets.

Metropolis research is currently monitoring 635 ‘live’ London office requirements, with pending deals for space of up to 1.5m sq ft due to sign in the next few months.

Cityoffices is close to completing on its autumn ‘Skyline Survey’ Report in London. Details on Metropolis database from Paul Ives at paul@metroinfo.co.uk

Banking and the Office Market

CBRE has just published its report: “Why We Can Bank on London 2018” which looks at subsectors within London’s financial services ‘ecosystem’: investment and retail banks, fintech firms, traditional asset managers and private equity firms and hedge funds. The intentions of occupiers in these sectors make up a large part of the Metropolis weekly office leads output.

The financial sector accounted for 27% of active space requirements by sq ft in autumn 2018

CBRE say Since the EU referendum, banks have continued to commit to London with Deutsche Bank taking 550,000 sq ft and SMBC taking 161,000 sq ft, while Wells Fargo took 220,000 sq ft for its new European
headquarters. However, banks have also been ‘nearshoring’ (moving staff to regional hubs in the UK) with Bank of America, JP Morgan and Deutsche Bank all announcing plans in late 2012 to move 3,000 jobs away from London.

The UK has been ranked first globally for the strongest fintech sector since 2016. It’s largest companies include Funding Circle, a peer-to-peer financing platform for companies and mobile banking service Revolut is achieving ‘unicorn’ status in April 2018 on reaching a valuation of $1.7bn (both companies’ intentions recently featured on Metropolis).  Fast growing Nutmeg is the first firm to offer an online discretionary investment management service in the UK. Fintech firms are dispersed but have tended to cluster in areas such as Canary Wharf and the City, where initiatives such as Level39 provide provide space. The typical lifecycle of a fintech firm begins in low-cost flexible space, usually in fringe locations. Typically, the firm then moves to a larger and more corporate space as it matures. Metropolis has run nearly 40 leads on fintech companies recently.

Private equity and hedge funds. London is the second largest centre globally for hedge fund managers  Over the past 10 years, firms other than banks or traditional asset managers have accounted for 61% of the sector’s total take-up of 27m sq ft in Central London. There are currently over 200,000 sq ft of office requirements live in this sector in central London. Metropolis has brought subscribers over 30 stories about hedge fund companies office move intentions in recent months.

CBRE conclude by forecasting the rise of agile working becoming more widely adopted in the banking sector, increasingly shifting towards more open plan offices and policies such as working from home. Firms are also increasingly considering an area’s wealth of amenities and transport links. For private equity firms in particular this could become a growing trend as they move away from prestige locations such as Knightsbridge and Mayfair to better connected locations.

Metropolis has run over 500 leads on London-based financial sector occupiers relocation intentions in 2018.

Merry Christmas to all Metropolis blog readers.

Paul Ives, Metropolis Head of Research. December 2018

The Evolution of Office Space

A recent blog from property consultant Savills, looked at the trends for the future of office space and some of the implications for market players. Savills say that the sector has progressed beyond putting a roof over workers’ heads, instead landlords and service providers need to be tuned to meet the needs of modern occupiers in order to attract businesses in an increasingly competitive landscape.

The relationships between landlords, tenants and staff has shifted. Building owners can no longer rely on the fact that they have four walls and a plug socket; but instead have to offer a best-in-class service if they want to entice occupiers to let their space. In turn businesses must provide their employees with a stand-out working environment if they want to both attract and retain the best staff.

So what are the emerging trends

Savills’ last What Workers Want survey showed that the workplace can have a significant impact on employees’ physical and mental health. Some of the measures that have caught the headlines have included running tracks on roofs, yoga studios and health-conscious canteens, but this is just the start. Savills predict more on-site GPs, crèche facilities and lockers for online retail deliveries to maximise employees time and productivity.

As well as the emphasis on wellness, there is also a need for greater sustainability and the impact that space might have on the wider environment. For this reason recycling, waste and energy consumption has never been so important. Metropolis finds increasing numbers of occupiers require office space with high levels of BREEAM standards as well as flexibility.

Metropolis has seen a high level of short leases negotiated in recent years alongside a trend for a floor by floor expansion by occupiers within an existing part-occupied building. In addition, refurbishment tenders incorperate a high level of IT utilisation and are now increasingly including flexibility to provide step free access.

Savills say that ultimately, landlords need to take the lead from the serviced office sector which is constantly adapting to create fresh ways of working to meet occupiers’ changing needs.

 

Metropolis Movers October 2018

Metropolis ran 616 business leads on ‘office movers’ in October 2018. If all reported moves were added together the total would exceed 14 million sq ft of office searches and transactions, researched by Metropolis’ unique market-led intelligence research team, last month.

London was the largest region with 300 business leads during month, but there were also strong showings from the North West (61), South East (52) and Yorkshire (52). Financial services, IT and business services were the largest business sectors planning relocations or agreeing moves during the month.

The relocation leads geographically covered the whole UK and provided details of the size of the office occupier, company 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 616 October leads, included those on occupiers Shell UK, IBM, WPP,Jane Street Capital and McCann Worldgroup .

The October 2018 leads included 161 ‘identified requirements’, including 100 in London. Which means that the company confirmed to researchers that it has current or future plans to search for alternative office space. Of these 175 searches, 109 were newly posted office searches, not previously notified to clients.

The most recent research also included 176 ‘potential movers,’ which were mainly longer-term leads on occupiers, considering a future relocation, but the occupier has yet to make a final decision on whether to search.

Most of the remaining stories covered companies that have just 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 2021.

Recent research by Metropolis concluded that a conservative estimate of ‘live’ business tender 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 Andy or Paul at andy@metroinfo.co.uk or paul@metroinfo.co.uk, mentioning ‘Metropolis Blog’