Scotland enjoys growth

CBRE’s H1 2015 report on Scottish office market trends concludes that take-up is above average in Edinburgh, Glasgow and Aberdeen.

In Glasgow, CBRE point to active requirements in excess of 800,000 sq ft, with local agents calculating that demand remains at an all-time high, despite a slightly subdued first half of 2015, with just under 225,000 sq ft of office deals, about 75% of the long term half year average.

The latest large transaction was the 27,522 sq ft let to Teleperformance at Cuprum, along with 10,000 sq ft let to Arup at 1 West Regent Street.

Interest in new schemes at 1 West Regent Street (where Metropolis has reported on the activities of Real Radio) and 110 Queen Street (where there is activity by Deloitte, amongst other) is growing, while St. Vincent Plaza, following its completion, is expected to follow suit with a number of interested potential occupiers. Metropolis is monitoring demand from companies such as Kier, AXA and Jacobs.

In Edinburgh, nearly 404,000 sq ft was transacted in the first half of 2015, which CBRE point out is just above the recent five year H1 average. Capita took the entire building (26,900 sq ft) at 145 Morrison Street and the Law Society of Scotland signed for 19,100 sq ft at Atria One.

Demand remains strong in Edinburgh, with requirements from companies such as KPMG, Amazon, Edinburgh University and Brodies. Metropolis is speaking to over 50 Edinburgh companies about current move plans.

Moorfield is speculatively developing Quartermile 4 and has secured a pre-let to FanDuel. FanDuel concluded the deal six weeks after agreeing terms.

The next large office scheme completion in Edinburgh is The Haymarket due for late 2017.

In Aberdeen, three large pre-let deals were struck during the first half of 2015: Anderson Anderson & Brown and LR Senergy committed to 45,000 sq ft and 100,000 sq ft respectively at Prime Four Business Park while KCA Deutag acquired 70,000 sq ft at City South. Take up in the first half of 2015 was 290,000 sq ft, which was a fall from the 800,000 in the second half of 2014.

Agents report that he majority of letting activity and requirements are in the sub 10,000 sq ft size bracket. Metropolis is tracking demand from companies such as Raggnar Power and Burnett & Reid.

London Relocation Trends

A recent report from Cushman & Wakefield highlighted relocation trends amongst larger companies in the London office market. Findings included:

Companies already based in Central London relocated from a total of 5.8 million sq ft in 2014, committing to 8.2 million sq ft. This equated to positive net absorption of 2.4m sq ft or 42% growth in floorspace occupied, compared with 33% in 2013. Metropolis figures show over 600 relocations to 5,000 sq ft or more in London in 2014.

Media & tech occupiers, followed by the banking and financial sector, accounted for 37% and 27% of total expansion in floorspace.

A shift from West to East was a key trend, with more than half of relocating West End occupiers (55%) moving to one of the City & Docklands submarkets, compared with only four relocations in the opposite direction. The number of West to East moves in 2014 (31) were considerably higher than the previous year (24). The upward trend is expected to continue throughout 2015.

C&W estimates that companies moving into Central London from further afield, together with start-ups, accounted for 12% of total transactions by number or 0.8 million sq ft in 38 deals.

The largest company to relocate to the capital in 2014 was Amazon, who took a further 86,000 sq ft at 1 Leadenhall Court EC3, as a short term option before taking Principal Place EC2. Other key relocations to Central London included Tudor Capital, who prelet 38,000 sq ft at 10 New Burlington Street W1, moving from Epsom and Tesco Digital relocating to Clerkenwell.

Serviced offices are another growing constituent of take-up in Central London, providing flexible office solutions. The sector accounted for 11% of total activity by number this year – 0.9 million sq ft in 37 deals.

Professional & business services companies showed the greatest willingness to move, with 54% (26/48) of large occupiers relocating. Examples included EY’s migration from Beckett House, SE1 to take a prelet at 25 Churchill Place, E14 and GSMA’s relocation from Midtown to 51,000 sq ft at The Walbrook, EC4.

The banking & financial sector saw a relatively high level of loyalty to existing areas with more than half of occupiers by number (58%) remaining committed to their submarkets. Société Générale was the largest financial relocation from the City Core to Canary Wharf while China Construction Bank moved in the opposite direction from Canary Wharf to the City Core. TDR Capital moved from 1 Stanhope Gate W1 to 20 Bentinck Street W1and SEI Investments from 1 Bruton Street W1 to Alphabeta EC2.

Looking ahead, falling vacancy rates and shrinking choice are expected to see companies expanding search areas to more fringe locations such as Hammersmith and White City, Stratford as well as Canary Wharf & Docklands in the short term. A recent Metropolis blog highlighted the increased pull of London Southbank to companies looking for grade A space at a lower rent than City or West End.

Central London Office Deals July 2015

Central London office lettings registered nearly 1.1m sq ft sq ft of transactions in July 2015, spread across 41 deals during the month.

The month was characterised by 13 deals over 20,000 sq ft, including Ashurst the law firm pre-letting at Fruit & Wool Exchange, E1; Kings College at three buildings in Aldwych Quarter, WC2; NESTA’s pre-let at 58 Victoria Embankment, EC4: Office Group at the White Collar Factory in EC1 and Balfour Beatty at 5 Churchill Place, E14.

Professional sectors topped the table of lettings by sector, helped by the Ashurst deal, followed by Education and business services. Under offers are steady at 4.2m sq ft, of which a substantial proportion is in the City of London.

By area, the City accounted for a little under half the deals (15) and 46pc of the floorspace let in the month. Office demand is calculated to be around 5.9m sq ft in the City and 2.8m sq ft in the West End. Availability fell to 10m sq ft, but a number of new schemes are poised to come on line.

The volume of grade A (newly built or refurbished office space) let during the month reached 800,000 sq ft (nearly 80% of the total), as transactions for newly developed or refurbished space again predominated.

Metropolis is about to publish a new report on statistics on the near 900 new requirements added to the database in the first half of 2015.

How many companies move at lease expiry?

According to new research by CBRE, the majority of companies choose to remain in their existing premises at lease expiry,

The survey analysed 500 companies in the UK and Netherlands to analyse occupier behaviour when ‘stay or go’ property decisions are being evaluated. Of those companies contacted, just 12% moved the last time their lease expired and of those who had moved premises nearly two-thirds had changed their footprint, with 50% expanding.

A large proportion of companies cited the relationship with the building management company as a significant factor in the decision on whether to stay or go.

Research by Metropolis has shown that companies in London are far more ready to relocate on lease expiry, with current trends indicating close to 60% launching searches within two years of lease expiry and 40% actually moving. In London the raising of rents or redevelopment are often the triggers for a move. In the rest of the UK there is less enthusiasm for relocation, with around 20% relocating at lease expiry.

In an age when office leases are shorter and shorter, with more and more break options, it is clear that landlords and managing agents need to be on top of their game to prevent occupiers from choosing to move out of their properties.