Metropolis Leads in July 2018

Metropolis ran 592 business leads on ‘office movers’ in July 2018. If all reported moves were added together the total would exceed 16 million sq ft of office searches and transactions, researched by Metropolis’ unique market-led intelligence research team, last month.

London was the largest region with 270 business leads during month, but there were also strong showings from the South East (71),  Scotland (69) North West (38) and Yorkshire (36). Financial services and business services were the largest business sectors planning relocations or agreeing moves during the month.

The relocation leads geographically covered the whole UK and provided details of the size of the office occupier, company 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 and top picks amongst the 592 July leads, included those on occupiers Facebook, Linklaters, Barclays, EBRD and Diageo.

The July 2018 leads included 172 ‘identified requirements’, including 90 in London. Which means that the company confirmed to researchers that it has current or future plans to search for alternative office space. Of these 172 searches, 105 were newly posted office searches, not previously notified to clients.

The most recent research also included 142 ‘potential movers,’ which were mainly longer-term leads on occupiers, considering a relocation, but the occupier has yet to make a final decision on whether to search.

Most of the remaining stories covered companies that have just 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 late 2021.

Recent research by Metropolis concluded that a conservative estimate of ‘live’ business tender opportunities on the database in recent months, exceeded £1bn of business.

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Regional Office Boost

CBRE’s recent report ‘United Kingdom Office – The Property Perspective H1 2018’ concludes that office mover activity in the regions outside London continued to be ‘lively’ during the first half of 2018

CBRE say that regional office occupier markets in the first half of 2018 with few signs of Brexit-related uncertainty. The ten regional cities monitored by CBRE, saw take-up reach nearly 3.9m sq ft, which was 24% above the five-year average and 37% higher than the 2.8m sq ft newly occupied in the same period of 2017.

CBRE saw large numbers of requirement in regional cities and say that relocation activity could have been even higher if there had not been a shortage of new office space in some cities. CBRE particularly point to shortages in Bristol, Edinburgh and Glasgow where the development pipeline has not kept pace with demand. These shortages will drive further pre-let and refurbishment activity.

Metropolis echoes the CBRE findings, with nearly 400 regional office requirement leads flagged to subscribers in the first half of 2018, together with a similar number of companies finding space for moves between January and June.

CBRE say that The UK’s flexible office space operators continued to expand, with Bristol, Birmingham, Glasgow, and the wider South East the stand out expansion locations in H1. Bristol witnessed a
notable increase in demand with a key deal to Runway East (30,000 sq ft). In Birmingham, deals were concluded with BE Group, Instant, iHub, Regus and Orega, whilst in Glasgow there were prominent deals to
Orega and Regus. In the wider South East region, flexible office space providers took nearly 200,000 sq ft with Slough and Reading the most popular locations. Runway East and other operators also have live requirements in all the regional cities, with CBRE predicting more activity from this sector in H2.

Regional cities saw a record year of take-up in 2017, with the public sector playing a large role in regional office space demand in H1 2018 (just over 0.9m sq ft). HM Revenue & Customs accounted for the three largest transactions ranging between 157,000 – 270,000 sq ft in Manchester, Glasgow and Liverpool.

CBRE forecast the West Midlands as a region to watch. They say the West Midlands is experiencing some of the fastest growth in the country – Birmingham itself seeing prices rise by 6.9% in the year to May Birmingham is attracting public sector bodies, looking for more affordable solutions away from London. The latest requirement is from the General Dental Council, relocating 200 staff London.

Smaller end of the market

Recent research from property firm Colliers International suggests a higher demand for startup-sized offices in London and this in turn is putting a downward pressure on lease lengths.

Colliers say that across London in 2018 to date, transactions for space of 5,000 sq ft or less represented 78% of the total deals by number, up from 69% in 2015. Sub-2,500 sq ft offices represented 57% of the deals by number – the category’s highest level since 2012.

Metropolis saw 306 letting in the first six months of 2017 of over 5,000 sq ft each, although in the same period in 2018 this fell slightly to 278 deals.

Colliers, which is forecasting the average lease to fall to 5.5 years during the course of 2018. The property adviser says that 2018 is the third successive year in which the proportion of sub-5,000 sq ft deals has risen.

According to Colliers, the trend is particularly evident across Shoreditch, Soho and Paddington.

WeWork’s exposure to London is likely to exceed 3.5 million square foot in 2018, putting increasing pressure on landlords, particularly those with assets around the 5,000 sq ft mark, to offer a more flexible, hybrid product to attract occupiers.

Stuart Melrose, director and head of occupier advisory for London offices at Colliers, commented: “We are seeing demand for flexible office space under 5,000 sq ft approaching an all-time high.

Research by Metropolis of over 820 London office lettings between January and June 2018 suggests an average lease size of 8130 sq ft compared to nearly 9,000 sq ft in 2017. The average lease length is 5 years, but with over 40% of lettings of 4 years or less.

The implication of this trend could be that companies operating in the market may need to contend with smaller relocations, with occupiers moving more frequently.