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 Cityoffices.net). 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.

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