Central London office lettings in July 2019

Central London office lettings in July 2019 reached 1.1 million sq ft, from 40 mid-large size office transactions (5,000 sq ft+) during the month. The July 2019 deals volume figure is in line with the current monthly London average of 1m sq ft.

July was characterised by 15 office deals over 20,000 sq ft, which were led by BT’s 328,000 sq ft pre-let at One Braham, E1; Diageo’s 106,000 sq ft pre-let at 16 Great Marlborough Street and WeWork’s 88,000 sq ft at Queen Victoria Street.

Telecom topped the table of lettings by sector, compiled by Metropolis, underpinned by the BT pre-let. This was followed by business services led by WeWork, Office Group and Knotel. The food and drink sector was also prominent with the Diageo West End prelet.

Office deals ‘under offer’ in central London rose to 4.1m sq ft, and pending deal volumes are healthy in nearly all sub-markets, with a number of deals in solicitor’s hands.

By area, the City accounted for 60% of the office floorspace let in July 2019 at 615,000 sq ft. The West End saw 319,000 sq ft of take-up. Docklands 76,000 sq ft, Midtown contributed 90,000 sq ft of lettings and Southbank 66,000 sq ft. Current London office demand is calculated to be around 3.9m 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 550,000 sq ft sq ft (33% of the monthly total), as transactions for new space maintained the recent strong showing. Availability is dominated by secondhand space in all London markets.

The large number of upcoming lease events in the core has been a key driver to mover activity .Metropolis research is currently monitoring 625 ‘live’ London office requirements, including a large volume of requirements from the banking and finance sectors, with pending deals for space of up to 1.5m sq ft due to sign in the next few months.

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Manchester Update

Recent research by Avison Young and MOAF reveals that Manchester city centre office activity reached 491,300 sq ft during Q2. The figure was 64% above the quarterly average and brings the year to date total to over 800,000 sq ft. Metropolis ran 40 business leads featuring companies relocating in the Manchester market in Q2 2019.

The largest move of the quarter involved Spaces agreeing the largest flexible workspace deal in the UK outside London, taking 122,000 sq ft at 125 Deansgate.  It also understood that BT is close to taking a significant amount of space. Other large moves recently researched by Metropolis included relocations by Hewlett Packard, ME Group, Jones Lang Lasalle and BASF.

There is considerable activity from the flexible workspace sector as WeWork has signed for its fourth location in Manchester, 51,000 sq ft at Hyphen and there are more than half a dozen co-working operators
looking for substantial amounts of space. Business services tends to dominate take-up in Manchester, accounting for a third of take-up.

Advertising and public relations company WPP have committed to 82,000 sq ft which will be constructed at Enterprise City, St John’s. Barclays expanded by 33,000 sq ft at Piccadilly Place. The largest deal in the out-of-town market was to telecommunications company Verastar, which has agreed a 61,000 sq ft deal at One Dovecoat in Sale. Marks & Spencer took 12,000 sq ft at the Alexandra, The Home Office taking 20,490 sq ft at the Soapworks and Capgemini taking 11,360 sq ft at Venus.

Looking ahead, Metropolis is monitoring almost 40 medium/large firms looking for space in Manchester, together with a further 70 tenants approaching lease expiries over the next two years.

There is 1.6 million sq ft of space under construction in Manchester, of which 38% is pre-let. Of the million sq ft of speculative space under construction, key developments include Landmark Oxford Road, 100 Embankment and Circle Square. Grade A remains in good stock with new developments such as 125 Deansgate and Landmark at St Peter’s Square due to complete in 2019. Between them they will bring 305,000 sq ft to the market, 133,000 sq ft of this currently under offer to new tenants.

Sheffield Update

According to the latest market statistics released by Commercial Property Partners, 57% of office take up in Sheffield in Q2 2019 was ‘out of town’.

The figures released by the commercial property agency showed that 39,304 sq. ft of the total 68,745 sq. ft take up was outside of the city centre. The total for H1 2019 increased to 266,196 sq ft, 34% more when compared to the same period last year.

CPP also reported a particular increase in demand for Grade B facilities, which accounted for 48,280 sq. ft of the total take up, at 70%.

A total of 15 deals occurred over the three-month period, the most significant of which was the take up of 20,000 sq. ft by education publishing house Twinkl at Hallamshire Business Park.

The figures also revealed continued activity within the professional and business services sector, with companies such as Etico Group securing 7,803 sq. ft at St James House, and Gleeson securing 5,510 sq. ft at Europa Court.

Meanwhile, the city region’s growing number of creative industry businesses accounted for 9,735 sq. ft of space, with Egress Software agreeing a five-year lease for a 7,500 sq. ft Grade A suite, following a recent announcement to grow its workforce from 90 to at least 120 people in 2019, and becoming partners of Sheffield Digital.

The development pipeline remains limited. Despite 27,000 sq ft of speculative space being delivered in Q2, Grade A availability remained limited with 85,000 sq ft being marketed in Q2. Works due to complete on just 81,000 sq ft of office space split between Steel City House and the NUM Building.

Sheffield City Council has signed up developer Scarborough International Properties to lead the expansion of the Sheffield Olympic Legacy Park. Over a dozen new buildings planned for Sheffield Olympic Legacy Park. The developer will spearhead the major regeneration project in the lower Don Valley area, initially aiming to build 750,000 sq ft of business space for the sport, health and well-being sector.

Scarborough plans for its first project as preferred development partner a building of around 40,000 sq ft of office space, close to Sheffield Hallam University’s ‘Advanced Wellbeing Research Centre. Scarborough expects to commence work on its building early in the New Year.