Central London Office Deals – August 2015

Central London office lettings registered a slightly muted 740,000 sq ft of transactions in August 2015, spread across 50 deals during the month.

August was characterised by 9 deals over 20,000 sq ft, including King.com the leisure/tech firm taking 65,000 sq ft at the Ampersand building on Oxford Street, W1; WeWork at the Space Shoreditch building in E1; Level 39 at Canary Wharf, E14 and London Executive Offices at 5 Cheapside, EC2.

Business services topped the table of lettings by sector, helped by the serviced office deals, followed by media and financial services. Office deals under offer (including RBC in the City) rose again to 4.3m 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 (19) but 48pc of the floorspace let in the month. Current London office demand is calculated to be around 6.1m sq ft in the City and 3.9m sq ft in the West End. Availability fell to 9.7m 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 300,000 sq ft (nearly 41% of the total), as transactions for newly developed or refurbished space took a large part of the total.

Metropolis is about to publish a new report on upcoming London office requirements for autumn 2015.

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Thames Valley sees take-up rise

A recent report from consultant Lambert Smith Hampton on the Thames Valley office market reported an impressive Q2 2015, with take-up increasing by 157%.

Total take-up of offices (over 5,000 sq ft) in Q2 2015 was 540,411 sq ft, compared with 210,348 sq ft in the same period in 2014. Total take-up in 2015 so far is 896,419 sq ft, compared with just 506,787 sq ft at the end of Q2 2014 – an increase of 77% year on year. LSH also report that 400,000 sq ft of further deals are under offer.

Some of the larger recent deals, all reported on Metropolis, include: Gartner taking 107,000 sq ft at Tamesis, Staines; Maersk Shipping taking 41,000 sq ft at The Point, Maidenhead; Hitachi Data Systems taking 35,817 sq ft at Capitol, Bracknell; South Oxfordshire District Council taking 33,250 sq ft at 135 Milton Park, Abingdon; Markerstudy taking 20,966 sq ft at Waterside House, Uxbridge; Aetna taking 20,128 sq ft at 25 Templer Avenue, Farnborough Business Park.

LSH recorded 5,000 new office inquiries during Q2 2015 which is slightly down on a year ago. New requirements on Metropolis include Biogen, Thales, Bayer, Osram and Worley Parsons. Named demand has increased significantly in the last two years and is currently estimated to stand at approximately 6.5m sq ft. There is a growing trend of tenants decentralising from central London locations to the Thames Valley and Heathrow areas. It has also been noted that occupiers are increasingly looking for different space in the Thames Valley with a more basic office environment with flexible floorplates becoming popular.

Metropolis Office Requirements – H1

Over 450 companies vie for London space

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Metropolis research identified over 17m sq ft of UK office demand in the first half of 2015. Just over 9.2m sq ft of this demand was for office space in Greater London, with over 450 companies searching for London space. In the rest of the UK Metropolis uncovered 400 requirements for new space representing 8.1m sq ft of office demand.

Central London office demand reached 8m sq ft, 3.8m sq ft (47.5%) of which was focused on the City of London. EC2 was the most popular postcode for companies planning a move,  with 1.4m sq ft of demand emerging in H1.

A significant proportion of total City of London demand (11%) came from two new law firm requirements, each firm looking for 200,000 sq ft. A new 150,000 sq ft requirement from an insurance group was also worthy of note. Demand from the banking and finance sector reached 1m sq ft, 26% of total City of London demand.

Demand for space in the West End, where rents can reach £125 psf, hit 1.8m sq ft. The largest West End requirement (150,000 sq ft) came from a social media group looking for offices in SW1. Just over 400,000 sq ft of office space (26% of total demand) was required by the banking & finance sector, 79% of which (315,000 sq ft) came from hedge funds and private investment firms.

Mid Town office demand reached 0.9m sq ft, pretty evenly split between WC1 and WC2. About 100,000 sq ft of Mid Town demand came from the technology sector and 90,000 sq ft from the media sector. Demand from law firms was just over 120,000 sq ft and demand from the banking and finance sector totalled 110,000 sq ft.

The largest office requirement in the South Bank (SE1) was a 140,000 sq ft search by an engineering and construction firm. Other requirements of note include a US insurance firm switching a 60,000 sq ft search from Maidenhead to London SE1, and a TV Broadcaster looking for 30,000 sq ft to house its news department.

Two big requirements dominated demand for office space in the Docklands: a German investment bank back office requirement for 350,000 sq ft and an information company requirement for 300,000 sq ft, with a sub-let mooted.

 

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The Top 5 Regional Cities

Manchester – The largest requirement, 400,000 sq ft, was a search by a government department considering space near Piccadilly Station in Manchester. Just over 250,000 sq ft of Manchester office demand came from the legal sector and 300,000 sq ft of demand was attributed to the insurance sector.

Edinburgh – Similar to the picture in Manchester, Edinburgh demand was dominated by a large government requirement for office space (300,000 sq ft), although this requirement could move to Glasgow. In terms of private sector demand, notable requirements included a 100,000 sq ft search by a US Bank and two significant searches from law firms seeking a move in central Edinburgh, one for 50,000 sq ft and the other 30,000 sq ft. There was also significant demand from the accountancy sector, with four firms searching for just over 130,000 sq ft.

Birmingham – A retail bank was linked with the largest office requirement in Birmingham: 170,000 sq ft,  a search now satisfied by space at Miller Developments Arena Central scheme.  Other significant requirements include a potential 100,000 sq ft search from a law firm and a 50,000 sq ft search from a business education group.

Reading – The largest requirement for Reading offices came from a network broadcaster looking for 150,000 sq ft, closely followed by a utility company searching for 140,000 sq ft. Both requirements also consider other Thames valley locations such as Bracknell, Farnborough and Slough.

Bristol – Bristol office demand was dominated by insurance company requirements, with the sector accounting for 56% of total demand (280,000 sq ft). Other notable requirements include an 80,000 sq ft search from a Bristol based law firm planning to combine two of its offices (which may now be a refurbishment and extension of the existing building) and an engineering group searching for 25,000 sq ft.

 

Top Ten Cities (Excluding London) by H1 Office Demand

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Copyright Metropolis Property Research Ltd 2015