London Docklands Review

Recent research by Cushman & Wakefield on London Docklands office markets revealed that in the second quarter of 2019 826,000 sq ft of office moves were agreed. This is the highest quarterly leasing volume for the area since Q2 2015. The total of 949,000 sq ft for the first half of 2019 is 46% above the five-year first half of the year average of 648,000 sq ft and significantly ahead of the same period in 2018.

The biggest transactions included the 358,000 sq ft pre-let by the European Bank for Reconstruction and Development (EBRD) at 5 Bank Street, which was the largest transaction in Q2. In addition, WeWork’s acquisition of 287,000 sq ft at 30 Churchill Place on a sublease from the European Medicines Agency, also made a large contribution. Consequently, Q2 take-up was dominated by the banking & finance and flexible workspace sectors, which accounted for 40% and 38% of quarterly take-up respectively. The public & government sector (18%) continued to feature, especially in nearby Stratford. There were also moves in Docklands for PKF Littlejohn, London, Borough of Tower Hamlets and Revolut.

Space under offer fell during the quarter, due to the leases signed by EBRD and WeWork. Overall office requirements in Docklands fell to 3.9m sq ft. This total is still 25% above the long term average of 3.1m sq ft, although this total also reflects companies that are also looking at other areas such as the City of London and West End. Business services and banking are the most active sectors in terms of office demand. Metropolis is monitoring office demand from tenants such as Clifford Chance, Citigroup and China Telecom.

Metropolis is monitoring the plans of over 130 office tenants that have lease expiries approaching in the London Docklands area over the next two years.

There is currently 2.9 million sq ft of space under construction in Docklands, of which 1.4 million sq ft (47%) is pre-let or under offer. The total volume of speculative space under construction increased for the second consecutive quarter to 1.5 million sq ft, up from the 1.2 million sq ft at the end of Q1. This was driven by two new starts at the Wood Wharf development: The Market Building (213,000 sq ft) and Frameworks Building, (250,000 sq ft), both due to complete in late 2022.

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Birmingham Review

Recent research from Colliers International saw office move activity in Q2 2019 in central Birmingham rise a substantial 65% on Q1 leasing levels, albeit driven by three large serviced office deals. The total number of agreed deals hit 320,595 sq ft in 30 deals according to the property consultant.

The quarter represents one of the strongest Q2 leasing levels in Birmingham since Q2 2015. The first half of 2019 overall saw 514,000 sq ft leased in 55 deals including Irwin Mitchell taking 46,750 sq ft at the Colmore Building and The Commonwealth Games who took 72,261 sq ft of Grade A space at One Brindleyplace. In Q2, the serviced office sector was responsible for 72% of total take-up. All three of the largest deals this quarter were attributed to WeWork, which leased a total of 229,042 sq ft in three separate deals: 92,670 sq ft over seven floors at 6 Brindleyplace, together with Louisa Ryland House (81,280 sq ft) and 55,092 sq ft at 55 Colmore Row simultaneously setting a new headline rent for Birmingham at £34 per sq ft. The 6 Brindleyplace deal was the largest in the city centre this year.

Without WeWork, the 2nd quarter would have seen take-up levels at their lowest (91,553 sq ft) since Q2 2012. Business services were the second-most active sector in Q2, accounting for 9% of total take-up.
The largest deal was for 8,097 sq ftat 52 Charlotte Street, let to Newhall Charlotte.

Total Grade A take-up totalled 262,587 sq ft, which was heavily skewed by the WeWork deals. Grade A take-up increased by 70% from Q1. Four out of 19 Grade A deals transacted this half was for space greater than 50,000 sq ft. The average Grade A deal size in H1 2019 was 21,935 sq ft.

Metropolis is talking to nearly 60 Birmingham occupiers of 5,000 sq ft or more approaching lease expiries in the next two years.

Agents say that the mover size bracket of 5,000-15,000 sq ft is unlikely to be affected by WeWork or the other serviced office providers, so agents expect to see continued healthy levels of take-up of this size. The 2,000-5,000 sq ft bracket will be watched with particular interest.

London West End Review

Recent research by Cushman & Wakefield on the London West End office market reveals:

West End office lettings in the Q2 of 2019 reached nearly 800,000 sq ft which was 7% above the average for second quarter take-up in the last five years. Across the first half of 2019 this brought total transactions to 1.83m sq ft which was 10% ahead of the five year average and 4.3% up on 2018.

Pre-lets played an important role in total take-up with 24% of space pre-let in the West End including large deals to G-Research, UK Parliament and Li & Fung

The volume of office space under offer in the West End increased to 1.2m sq ft. This was 54% ahead of the five year average and should fuel more deals in the second half of the year. Indeed we have already seen another big West End pre-let, with the 105,000 sq ft pre-leased to Diageo at Great Marlborough Street, London, W1. Further deals have been concluded to the serviced office sector.

Metropolis is monitoring a large number of large West End requirements by occupiers such as: Apollo Management, Technicolour and Ralph Lauren. West End requirements at 4.7m sq ft are well above their  long-term average.

New, Grade A space lettings accounted for 65% of lettings according to C&W. In addition, nearly 50 of the 180 recorded office moves or expansions were over 5,000 sq ft in Q2. Some 20% of the relocations were by office tenants in the financial sector, followed by 19% in the technology and media sector.

Supply of offices is tight in the West End with a vacancy rate of 4% and only one building able to accommodate movers of greater than 100,000 sq ft. There are currently only 28 buildings which are set to be delivered over the next five years, which will have floorplates 15,000 sq ft and over. The majority of available space is in the fringe, Hammersmith and White City. Some 72% of space in the West End currently under construction was pre-let.