The Magnificent Seven

A recent report from Savills reveals that for a fourth consecutive year, UK regional city office take-up has surpassed the long term average of 9.1m sq ft. Total take-up in 2016 reached an impressive
9.6m sq ft, despite a year of political uncertainty.

The final quarter of regional office take-up in 2017 reached 2.4m sq ft, the strongest quarter since Q2 2015. Roughly the same level of occupational demand was recorded during the first half and second half
of the 2016, with no post referendum slowdown evident.

The most active of the seven major UK cities in 2016 were Bristol and Cardiff, which recorded take-up improvements of 42% and 10% on 2015’s levels respectively, with Cardiff achieving its highest level of take-up in 15 years. A key driver of occupational demand in these cities was the Government Property Unit (GPU) requirements for consolidating public sector bases into regional hubs. Savills expect the GPU to be the key contributor to acquisitions over 100,000 sq ft in 2017 in cities including Birmingham, Manchester, Leeds, Edinburgh and Belfast, during 2017.

The most active business sectors during 2016 were the insurance and financial services sector, accounting for 1.2 million sq ft (15%) of space taken, which marked a record year. Key deals include: Swinton
Insurance taking 165,000 sq ft at 101 Embankment, Manchester, whilst MotoNovo Finance took 72,000 sq ft at One Central Square, Cardiff.
The tech sector remained an important contributor to take-up during 2016 and accounted for 20% of the number of transactions. This sector has traditionally contributed to the smaller end of the market, but also included Co-op Digital acquiring 45,000 sq ft of accommodation in Manchester, while Micro-chip designer, Cirrus Logic’s 70,000 sq ft letting at Quartermile, Edinburgh marked the largest regional tech deal last year. Edinburgh witnessed the highest proportion of tech take-up of all the UK cities.

Metropolis ran 53 medium and large office requirements for Birmingham in 2016, totalling 1.4m sq ft; the totals for other cities were Bristol 66 requirements and 1.6m sq ft; Cardiff 35 requirements and 1.1m sq ft; Edinburgh 65 requirements and 1.5m sq ft; Glasgow 51 requirements and 1.4m sq ft; Leeds 74 requirements and 2m sq ft; Manchester 90 requirements and 2.5m sq ft.
A shortage of Grade A floorspace in city centres,  prompted occupiers to look out of town as total fringe/out of town take-up reaching 2.8 million sq ft, eclipsing the record level set during 2014. Occupiers were also attracted out of town offices due to availability of larger floorplate stock and cheaper rents, particularly in the Manchester and Glasgow markets. Glasgow was boosted by the University of the West of Scotland’s 225,000 sq ft pre-let of the Eco Campus.

Overall, 44% of the 3.6m sq ft of regional office space currently under construction across the UK regions has been pre-let. Examples include PwC’s part pre-let of One Chamberlain Square in Birmingham
There are 8 million sq ft of known lease expiries over the next five years, there also remains underlying demand for new space, with the likely strongest performers for 2017 predicted to be Leeds, Cardiff and Bristol. There is a shortage of Grade A space, particularly in Bristol and Manchester. Top regional rents remain low relative to Central London.

The Metropolis view is that demand is holding up well in regional cities with 130 new requirements added to the database for the seven largest cities outside London in Q1 2017.

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Central London Lettings March 2017

Central London office lettings in March 2017 recorded nearly 1.05m sq ft of deals from 64 mid-large size transactions (5,000 sq ft+) during the month.

The March’s figure represents a rise on the 905,000 sq ft of lettings in February, and brings the Q1 2017 total upto nearly 2.6m sq ft of market activity, close to the recent average.

March was characterised by 13 office deals over 20,000 sq ft, which included Cancer Research’s 100,000 sq ft pre-let in Stratford: the Amazon’s 89,000 expansion at Principal Place in London, E1; ITV taking 88,000 sq ft at Waterhouse Square, WC1 and HSBC taking 31,000 sq ft at 71 Queen Victoria Street, EC4.

Tech and IT services topped the table of lettings by sector, underpinned by the Amazon deal, this was followed by charity headed by the Cancer Research transaction and media with large deals involving ITV and Buzzfeed. Business services also performed well helped by the lettings to Instant Offices and The Space. Office deals under offer in central London remain at 2.1m sq ft.

By area, the City accounted for an improved 40pc of the office floorspace let in March – a doubling of the February level. The West End saw 220,000 sq ft of take-up. Midtown contributed 140,000 sq ft of lettings. Current London office demand is calculated to be around 3.5m sq ft in the City and 3.2m sq ft in the West End.

The volume of grade A (newly built or refurbished office space) let during the month reached 243,000 sq ft (23% of the monthly total), as transactions for new space maintained their recent strong showing.

Cityoffices and Metropolis are shortly to release its twice yearly Skyline report on the London office construction market. The Q1 report features details of the 100 schemes under construction and the trends for the next wave of schemes. Details on Cityoffices from Andy King at andy@metroinfo.co.uk

Spring Step for South East Offices

A recent report from Colliers International concluded that office lettings in Q1 2017 in the South East reached 741,295 sq ft, which is down around 5% on a year ago

The largest deals in the first quarter were to ASOS at Leavesdon Park, Watford (75,000 sq ft), Rank in Maidenhead (40,000 sq ft) and Allegis in Bracknell (31,000 sq ft). Macquarie Bank recently moved some office functions from their City HQ to Reading taking 12,500 sq ft.

Some 51% of take-up this quarter was for office space between 20,000 sq ft – 50,000 sq ft, which came in 12 deals.

Watford witnessed strong take up this quarter (105,000 sq ft), including ASOS at Leavesdon Park and Salmon Ltd who took a 30,000 sq ft pre-let at Clarendon Works.

Demand for space across the south east remains high according to Strutt & Parker, currently standing at 4.6m sq ft – of which 10% (462,000 sq ft) is under offer.

Metropolis added nearly 50 new searches for office space in the South East region to its live database in Q1 2017. Sectors with most occupiers newly searching include law, insurance pharmaceutical and a number of IT-related companies.

There continues to be strong occupier demand for best quality office space across the entire region say Colliers. However, supply of new office space is down 7% on Q4 2016 and the availability of vacant offices is down to half the 2010 level. There are relatively few schemes coming to the market over the next two years in both the Thames Valley and the wider South East.

Q1 2017 saw new record office rents set in Hammersmith (£59.00 per sq ft), Maidenhead (£38.00 per sq ft), Reading (£36.50 per sq ft), Watford (£31.50 per sq ft) Redhill (£31.50 per sq ft) and Slough (£28.50 per sq ft).

Metropolis Research in Feb and Mar 2017

Metropolis ran an average of 635 ‘movers’ in the months of February and March 2017, some 1,271 in total. If all moves were added together the total would exceed 5.5 million sq ft of office transactions, researched by Metropolis’ unique market led intelligence team. London was the largest region with an average of 280 leads each month, but there were also strong showings from the South East, Scotland and Yorkshire. Financial services and TMT (technology and media) were the two largest business sectors planning relocations.

The business leads covered the whole UK and provided details of the size of the office occupier, its likely move dates, a description of the reasons for the move, its business sector and full contact details including an address for written inquiries, at least one telephone number and in most cases an email address. Some of the largest planned moves amongst the 635 leads included leads on Apple, Deutsche Bank, Michelin and Goldman Sachs.

The February and March 2017 leads included 361 ‘identified requirements’. Which means that the company confirmed to researchers that it has current or future plans to search for alternative office space. Of these 361 searches, 238 were new office searches, not previously notified.

The most recent research also included 380 ‘potential movers’ which were mainly longer-term leads on occupiers which are considering a relocation, but have yet to make a final decision on whether to search.

Most of the remaining stories covered companies that have signed for new office space and have set a move date, including some large pre-lets and companies inviting tenders for fit-out contracts. The shortest planned move date is just over a month away, whilst the longest was mid 2020.

If you would like some information on flexible Metropolis subscription packages, then please email Simon at simon@metroinfo.co.uk

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Cityoffices.net, the sister property leads service to Metropolis, saw a further 50 stories posted in February and March covering new development opportunities planning applications, consents, construction starts and development teams. The database now covers over 200 office schemes in the pipeline for construction starts in 2017-2020.

For more information on Cityoffices, email Andy at andy@metroinfo.co.uk