Central London Office Lettings April 2015

Central London office lettings registered a healthy 1m sq ft sq ft of transactions in April 2015, spread across 47 deals during the month.

The month was characterised by 11 deals over 20,000 sq ft, including Transport for London at the Stratford Quarter; Kings College London at Bush House, WC2: BRIT Insurance at the Leadenhall Building, EC3 and Facebook in Euston Road, NW1. Other large lettings included deals to Microsoft, Office Group and London Metal Exchange.

Transport and financial sectors topped the table of lettings by sector, helped by the TfL and London Metal Exchange deals, followed by computer/IT and business services. Serviced office operators continue to be very active in central London. Under offers by negotiating tenants are thought to be around 3m sq ft., with the largest as DLA Piper in the City.

By area, the City accounted for over half the deals (32) and 68pc of the floorspace let in the month, while Docklands saw nearly 270,000 sq ft let in just two deals. Office demand is calculated to be around 5m sq ft in the City and 2.5m sq ft in the West End.

The volume of grade A (newly built or refurbished office space) let during the month increased to over 500,000 sq ft as transactions for newly developed or refurbished space rose again.

Metropolis is sending a spring 2015 report on office space just completed and under construction in London to clients, based on its extensive database of planned and under construction office schemes.

Manchester Spotlight

Recent research on the Manchester office market by GVA, points to a rising demand for office space in the city. After a record 1.3m sq ft of office take-up in 2014, there were deals totaling 320,000 sq ft in the first quarter of 2015, including lettings to PWC, EY, Bupa, Trowers Hamlyn, Home Office (UK Visas), Citation and Rental Cars.

The future of office demand in Manchester is looking bright with Metropolis tracking up to 50 active searches in Manchester, including requirements by Freshfields, Shoosmiths and Aviva. Research by Metropolis has revealed that the largest sector for office demand in the city comes from professional services firms (accountants, law firms, consultants etc); this is followed by business services, financial services and media. Metropolis is also tracking 150 upcoming lease expiries in Manchester over the next two years, many of which could result in searches. Local agents also point to a number of inward investments and branch office openings into the city. As a result prime office rents have risen from £30 psf to £32 psf in recent months.

The demand upsurge has prompted a new wave of Manchester office construction, which now encompassess 850,000 sq ft of office space underway in the city. New office scheme starts include the 267,000 sq ft No 1 Spinningfields following a 50,000 sq ft pre-let to PwC plus One New Bailey (125,000 sq ft), 101 The Embankment (165,000 sq ft), The Cotton Building (165,000 sq ft),  First Street (150,000 sq ft) and Two Peter’s Square (161,000 sq ft). However most are at an early stage, as a result there are no major completions until the second half of 2016.

In conclusion, recently released statistics show a healthy 5% per annum increase in Manchester private sector office employment between 2009 and 2014, which is greater than London. Future GDP growth is forecast at 3.5% per annum, better than the UK average at 2.8%. The general consensus is that the growth in the market and the age of a proportion of existing buildings, means that there are up to 1m sq ft of ‘grade A’ office requirements in Manchester, together with a number of longer term strategic requirements.

Thames Valley growing

Recent research by CBRE concluded that 900,000 sq ft of office deals were signed in the Thames Valley in the last months of 2014. The total for the whole year was 1.7m sq ft of office transactions. The consensus view is that a lot of deals that could have been done, have been delayed. A number of large requirements are now likely to be satisfied in 2015 and agents forecast over 2m sq ft of deals this year.

Deals that did complete in 2014 included: PepsiCo taking 104,870 sq ft at 450 South Oak Way, Green Park, Reading. IMG acquired 72,250 sq ft at Building 6, Chiswick, VM Ware taking 63,000 sq ft in Staines, whilst Gilead Sciences took 51,132 sq ft on Stockley Park, to add to the 47,000 sq ft it occupies in the adjoining building. Philip Morris & Co. took the remaining 34,230 sq ft at 10 Hammersmith Grove, London, W6 and the Highways Agency took 38,000 sq ft in Guildford. Recent 2015 moves listed on Metropolis include Capita in Reading, Oxford Policy Management and Isis Innovation.

Live requirements include Discovery Communications looking for 150,000 sq ft, Universal has a 100,000 sq ft requirement in West London and UCB Pharma is shortlisting for a 200,000 sq ft search in the M4 corridor. In addition, Maersk and Acenden are under offer on offices along the Thames Valley. In total it is calculated that there are over 4m sq ft of live office requirements for towns in the M4 corridor.

There are a number of speculative office schemes under construction including four in Reading, together with schemes at Chiswick Park, Hammersmith, Farnborough, Slough and Leatherhead.

Future growth is expected in advance of the completion of Crossrail in 2018, especially Slough and Maidenhead which will have stations, but also centres such as Reading, Bracknell and Basingstoke, as businesses position themselves to appeal to high calibre staff. In addition, with central London office rents rising faster than outside London the Thames Valley is starting to see some cost-driven relocations.