London 2015 take-up tops 12m sq ft..Again

The results are in on central London office take-up in 2015.

Total transactions over 5,000 sq ft in the year amounted to 12.2m sq ft researched by Metropolis, a similar figure to 2014. The lettings breakdown included nearly 6m sq ft in the City; 1.2m sq ft in Docklands; Midtown 2.2m sq ft; West End 2.7m sq ft; Southbank 0.3m sq ft.

By office grade, a substantial 5.9m sq ft of the 12.2m sq ft was grade A, ie newly built or recently refurbished space. Some of the larger examples of grade A lettings included a flurry of deals at the Straford Quarter, Aldgate Tower, Leadenhall Tower, Alphabeta Building, Park House in Oxford Street and 58 Victoria Embankment. The highest rent recorded was nearly £100psf in a recently completed Mayfair scheme. Although the year saw more than 20 substantial pre-lets, the majority of grade A lettings came after the building completion. Developers seem to be benefitting from the ‘build it and they will come’ philosophy.

The most active sectors in 2015 are set out below. All figues in million sq ft.

Financial 3.2
TMT 2.5
Business Services 1.8
Professional 1.6
Insurance 0.4

Although financial services heads the list with 3.2m sq ft of deals, boosted by large pre-lettings to Deutsche Bank and Royal Bank of Canada, it was closely followed by TMT (technology, media and telecom). Large deals included Google, Facebook, Universal Music and Hewlett Packard. Also showing strongly are business services (WeWork took over 500,000 sq ft) in the year and professional services was boosted by big pre-lets to ashurst Morris Crisp and Deloitte.

Looking ahead to 2016, a similar year is in prospect. Some 7m sq ft of un-let speculative office space is under construction in central London, with a further 8m sq ft at demolition stage, according to There are office requirements totaling around 10m sq ft for the City, Midtown, West End, Docklands and Southbank, plus a further large tranche of companies making decisions on future lease expiries. Based on current trends upto 6m sq ft of demand could go to under construction or newly refurbished space with a similar volume of secondhand space lettings. So another 12m sq ft of deals in 2016 is likely.


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Insurance Sector at a Premium

A recent report by property consultant CBRE focusses on prospects for the insurance sector. The London market includes 65 speciality insurers, 91 Lloyds syndicates, 56 managing agents and over 200 insurance brokers. In addition, centres such as Manchester, Birmingham, Bristol and Edinburgh are also seeing considerable activity.

The report cites recent deals by Aon, JLT, Zurich and Markel in moving from older premises to modern single building London HQs. Indeed, the success of the ‘Walkie Talkie’ office tower in Fenchurch Street and the ‘Cheesegrater’ both in EC3 can be largely attributed to the dozens of relocating insurance companies. The report also spotlights a high level of merger and acquisition activity that has led to combined office requirements. Recent merger examples include Aviva and Friends Life, Ace and Chubb, Swiss Re and Guardian, Mitsui and Amlin as well as Willis and Towers Watson. Further consolidation is forecast.

Future insurance sectors trends could include the creation of out of town support centres, quite possibly in regional cities, as seen in the banking and legal industries. The implementation of new technology is likely to speed this process over the next few years. Metropolis is currently tracking 35 medium/large insurance companies in London with confirmed requirements or approaching lease expiry decisions. In addition, Metropolis is preparing to call a further 40 London-based insurance companies with lease expiries approaching. The majority of these are based in the EC3 postcode area of the City of London. Beyond London, companies such as Aon, Allianz, NFU, Aviva and Zurich are expanding and upgrading their regional centres.

Overall, insurance companies occupy almost 6m sq ft of offices in central London with 2m sq ft of space occupied by companies that are within five years of a lease expiry. Metropolis estimate up to 3m sq ft of insurance occupied office space is spread across the rest of the UK.

London office schemes in the pipeline that could appeal to insurers include: the redevelopment of 6-8 Bishopsgate; the 880,000 sq ft of 40 Leadenhall Street otherwise known as the ‘Leadenhall triangle’; 70 St Mary Axe; the Scalpel; 80 Fenchurch Street and Leadenhall Court (further details on In total, nearly 2m sq ft of pipeline insurance district office space.

In conclusion, any thoughts that the completion and near full letting of 20 Fenchurch Street and the Leadenhall Tower would take the wind out of the rise in insurance sector office demand looks misplaced, with a forecast increase on the 450,000 sq ft of London insurance lettings in 2015, for the year ahead and regional requirements of over 300,000 sq ft.

London Lettings – December 2015

Central London office lettings maintained momentum with a further 1.1m sq ft of transactions in December 2015, spread across 74 deals during the month. The annual total reached just over 12m sq ft, about 5% below the 2014 total.

December was characterised by 15 deals over 20,000 sq ft, including WeWork at Waterhouse Square, EC1; Carlyle Group at St James’ Market SW1; Turner & Townsend at One New Change, EC2; Office Group at Eastbourne Terrace, W2 and and RGA Media at 99 Clifton Street, EC2.

Business services topped the table of lettings by sector, helped bytwo WeWork deals, followed by financial services boosted by Carlyle. Computer and media sectors are also performing well. Office deals under offer remained around 3.5m sq ft.

By area, the City accounted for only just over a third of the total space let at 36pc of the floorspace let in December. Midtown, Victoria and Southbank all had a good month. Current London office demand is calculated to be around 5.9m sq ft in the City and 3.6m sq ft in the West End.

The volume of grade A (newly built or refurbished office space) let during the month reached 400,000 sq ft (36% of the total), as transactions for newly developed or refurbished space took a slightly smaller part of the total this month.

Metropolis is working on an upcoming report on office requirements in London and across the UK.

The 2016 UK Office Market Outlook

A report out this week from consultant CBRE on the outlook for the UK office market in 2016, suggests that despite some slight economic slowing, that most office sectors will see further growth over the next 12 months.

The report forecasts that although central London will continue to be the major engine of UK office market growth, the pace of that growth will ease slightly in 2016, due to a softening of UK growth. The report suggests that a dip in new office completions in London in 2016 will push up rental growth, however an increased pipeline of completions in 2017 will give office tenants more choice in the medium term.

Outside London, the report suggests that the South East will see more activity in 2016, after a sluggish 2015. Recent, mainly pre-let driven, quarterly take-up records set in Bristol, Manchester, Leeds, Aberdeen and Birmingham are unlikely to be repeated and the churn of secondhand office space is likely to become the mainstay of regional office take-up again, albeit alongside a lower level of pre-let deals.

The report spotlights that the areas where office demand is currently highest include West London and Thames Valley. Central London demand remains around 10m sq ft. It also forecasts an increase in speculative office development in regional centres. Schemes are tracked on the Cityoffices website.

Current Metropolis statistics show close to 1,000 unsatisfied office requirements across the UK of 2,000 sq ft+. In addition, there are over 500 lease expiries approaching in London alone, where companies have yet to make up their minds on whether to stay or go.

Based on similar audits of office requirements in recent years, office demand looks stronger than for a number of years.