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 GirlMeetsDress.com and Hassle.com 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.

Manc

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.