Occupiers go footloose

A recent market bulletin by property consultant JLL mentioned the trend for London office occupiers to move across the central area in the search for the right office space.

Research by Metropolis for its April 2014 London fit-out report bears out the point. Amongst the large grade A lettings completed in the last 12 months, some 25% of them involved companies taking space in different London districts to the one they are currently located in.

Examples include: Capita moving from the West End to 104,000 sq ft at 10 Aldermanbury in EC2; Hachette moving to 135,000 sq ft in EC4 from Euston; Ramboll moving to 30,000 sq ft at 240 Blackfriars Road in SE1; Google moving from Victoria to 730,000 sq ft at Kings Cross; EY and Shell moving from Southbank to Docklands. There are many more smaller examples among last year’s 12m sq ft of office deals in central London.

A review of the current near 700 outstanding requirements for office space in London suggests only 60% of occupiers are looking in only their existing office district, or adjoining areas, with as much as 40% of London tenants prepared to consider anywhere in the central area.

Conversations with tenants suggest that the quality of the office space has become more important than micro location, when considering London office moves. In addition, there have been relatively few new office schemes completed in the West End in recent years which, in combination with high rents, has pushed tenants towards other areas.

Looking ahead, recent deals in Q1 2014 suggest the process is speeding up with lettings at The Shard in SE1, Pancras Square in Kings Cross and a raft of deals in Canary Wharf, E14 showing a movement to good quality space in what could be considered slightly fringe areas. We expect this trend to continue through 2014 and 2015 based on the footloose searches by London tenants currently out looking.

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