Rise of the Media Sector

Metropolis has been undertaking research into the rise in office demand from the media sector in London.

Analysis of office lettings over the past two years shows that media and IT sectors have done much to drive the resurgence of office demand, alongside latterly financial, professional and business services.

The Metropolis research estimates there are currently 80 medium/large office requirements by media firms (advertising, marketing, public relations and broadcasting) in central London, including Sony, ITV and AKQA. Current demand totals 2m sq ft of office lettings over 2015 and 2016 if all current searches come to fruition.

Nearly 1.2m sq ft of central London office space was let to media firms in 2014 including: Havas taking 183,000 sq ft at 3 Pancras Square, Kings Cross; Omnicom’s 168,000 sq ft letting at Bankside 2 Southwark Street; and Euromoney taking 48,000 sq ft at 8 Bouverie Street, EC4.

There is a moderate supply squeeze in supply of new London office space in 2015, with a number of large developments due to complete in 2016. Consequently, finished developments are coming under closer scrutiny and a number of media companies are under offer on recently completed space.

In addition there are a large number of smaller media firms currently based in buildings set for demolition in the next two years. Discussions with Metropolis research suggest a large number of decisions are due to be made in summer 2015.

Looking ahead, Metropolis forecasts that with the combination of lease expiries, expansions, mergers and new market entrants; media sector office moves could reach an average of nearly 1m sq ft per annum in central London over the next few years.

Central London Lettings Jan-Feb 2015

Central London office lettings dropped in the first two months of 2015 to just under 990,000 sq ft in 60 deals in January and February 2015.

The months were was characterised by a shortage of large deals, with only the 60,000 sq ft letting to Hewlett Packard at 1 Aldermanbury Square, EC2 and 167,000 sq ft to WeWork at More Place, EC2, the only ones over 50,000 sq ft. Other large lettings included deals to Investec, Aimia and the Royal College of Pathologists

Business Services and the computer and IT sectors topped the table of lettings by sector, helped by the WeWork and HP deals, followed by financial services and transport. The media and law sectors looks likely to provided some momentum in the months ahead.

By area, the City accounted for over half the deals and 62pc of the floorspace let in the months, while Midtown saw 10 deals totaling 120,000 sq ft including a major deal to Aimia.

The volume of grade A (newly built or refurbished office space) let during the month dipped to under 300,000 sq ft as transactions for newly developed or refurbished space slowed during the period. However there are a number of large lettings in the pipeline at ‘under offer’ stage.

Metropolis is preparing a report on current office deals under offer in London based on its extensive database.

Law firms intensify demand

A recent report by property consultant CBRE underlines recent Metropolis research on the law sector in London.

The report highlights law firms efforts to use their space more efficiently as well as using lease events to rebuild IT networks and change working methods. The report also estimates there are currently 24 medium/large office requirements by law firms in central London (Metropolis is currently tracking 28 searches over 10,000 sq ft in London), including DLA Piper, Withers and Ashurst.

Nearly 800,000 sq ft of central London office space was let to law firms in 2014 (a similar level to 2013) including: Mishcon De Reya taking 116,000 sq ft at Africa House, Kingsway; HowardKennedyFsi’s 54,600 sq ft letting at 1 London Bridge; Ropes & Gray’s 45,000 sq ft pre-let at One New Ludgate; DWF’s 43,000 sq ft deal at 20 Fenchurch Street. In addition, Boodle Hatfield took 23,000 sq ft at 240 Blackfriars, and Radcliffe’s le Brasseur agreed a deal to take 29,000 sq ft at 85 Fleet Street.

In addition, a wave of law mergers has led to a number of firms bringing two previously separate operations together under one roof. There are currently over a dozen mergers at various stages and some recent examples include Locke Lord and fellow US law firm Edwards Wildman; Morgan Lewis and Bingham McCutcheon, as well as Charles Russell and Speechly Bircham.

Looking ahead, a number of firms are saying they plan to re-gear leases at impending renewal including Simpson Thatcher & Bartlett, Dechert, Watson Farley & Williams, and Kirkland & Ellis. There has been a gradual trend to dispose of surplus space in recent years. However, there is nearly 5m sq ft of lease expiries and break options, amongst law firms, approaching in the next five years, so activity looks likely to be brisk and deliberations often start early. CBRE’s survey work indicates that discussions may begin four or five years ahead of any lease event, with the broadest possible consultation among the firm’s partners and lawyers.

Metropolis forecasts that with the combination of lease expiries, expansions, mergers and new market entrants; law sector office moves could reach an average of nearly 1m sq ft per annum in central London over the next few years.

Newcastle goes out of town

Office take-up in Newcastle reached 772,000 sq ft in 2014 according to a recent report by consultant BNP Paribas. The figure was 14% above the 5-year average, but 8% down on the 2013 total.

Much of the activity was in the out of town business parks with 546,000 sq ft of transactions outside the city centre according to the property group. For example Utiltywise took 77,000 sq ft at the Cobalt 22 Business Park, while Siemens also took 39,000 sq ft at Cobalt and Cofely took 26,000 sq ft at Quorum.

In town the largest deals were University of Newcastle taking 34,000 sq ft at 89 Sandyford Road and Teleperformance taking 28,300 sq ft at Baltic Place.

Stephenson Quarter’s 34,000 sq ft ‘Rocket’ scheme is the only scheme under construction.

Metropolis is currently tracking around 20 office requirements and forthcoming lease expiries in Newcastle which total around 200,000 sq ft in both city centre and business parks.