Guildford and Surrey Office Markets

Recent research by Savills has highlighted office market activity in Guildford and the wider Surrey area. The report reveals that the town has become a creative and tech powerhouse, which has driven a higher rate of economic growth than comparable towns, however that growth could be dented in the future if occupiers relocate away from the area.

Research by Metropolis has revealed that medium/large office moves totalling nearly 700,000 sq ft have been signed in Surrey so far in 2019, including big moves for Gartner in Staines, Discovery Financial in Farnborough and GRENKE in Guildford. Recent leads from Metropolis have highlighted more than 80 occupiers searching, preparing to search, or agreeing moves in the county, including over a dozen in Guildford and others considering the town.

Savills say that a major contributor to Guildford’s success story in recent years has been the University of Surrey, through scientific and technological research, with a strong reputation in health, medicine, space, environment and mobile communications.

Surrey Research Park, attached to the university, encompasses 700,000 sq ft of office, research and development space, and is home to over 140 companies. One sector that has benefited from the tech focus of the area, is the gaming industry.  Guildford is home to the largest cluster of video gaming companies in the UK, with over 60 studios and more than 1,000 employees in the sector, with further growth plans. Guildford’s gaming community was further strengthened recently when Electronic Arts committed their future to the town by consolidating Onslow House and expanding to lease a further 22,000 sq. ft. in 2019. There are now proposals for the research park is set to be extended with an extra 325,000 sq ft of space planned, as part of the Blackwell Farm extension.

The central Guildford market has benefited from Beltane Asset Management’s recently developed 42,000 sq ft at 255 High Street, and M&G Real Estate comprehensively refurbished London Square (much of which taken by Grenke), while Investra are speculatively developing 30,000 sq ft at Riverworks which is due to complete later this year. Savills say there is a threat of occupiers been drawn to the Oxford-Cambridge corridor and the M4. There have been several corporate relocations from Guildford since 2018 including Ericsson and Sanofi both moving to Reading.

Metropolis is talking to nearly 250 Surrey occupiers (50 in Guildford) that are approaching lease expiries in the next two years.

 

Central London Office Market September 2019

Central London office lettings in September 2019 reached 1.2m sq ft sq ft, from 57 mid-large size office transactions (5,000 sq ft+) during the month. The September 2019 deals volume figure is above the current monthly London average of 1m sq ft.

September was characterised by 14 office deals over 20,000 sq ft, which were led by WeWork’s long awaited 287,000 sq ft deal at 30 Churchill Place, London, E14; Li Fung’s 51,000 sq ft deal at West Works, W12; Intermediate Capital’s 50,000 sq ft pre-let at Procession House, EC4 and Hana’s 45,000 sq ft deal at 70 St Mary Axe, EC3.

Business services topped the table of lettings by sector, compiled by Metropolis, underpinned by lettings to WeWork, Knotel and Hana. This was followed by financial services, led by deals to Ion Trading, Nasdaq and Triton. The IT services sector was also prominent.

Office deals ‘under offer’ in central London rose slightly to 3.7m sq ft, with pending deal volumes are healthy in nearly all sub-markets, with a number of impending deals in solicitor’s hands.

By area, the City accounted for 36% of the office floorspace let in September 2019 at 442,000 sq ft. The West End saw 280,000 sq ft of take-up. Midtown contributed 181,000 sq ft of lettings. Current London office demand is calculated to be around 4m 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 416,000 sq ft sq ft (35% of the monthly total). Slightly down on recent months. 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 640 ‘live’ London office requirements, including a large volume of requirements from the banking and finance sectors, with pending deals for space of up to 2.5m sq ft due to sign in the next few months.

Thames Valley Rising

The recent JLL research on the M4 western corridor office market reveals that office lettings in the first half of 2019 topped 1m sq ft – the third successive year that take-up volume has increased.

A large proportion of the moves agreed to summer 2019, came in west London, which accounted for 433,000 sq ft of deals. The rest of the Thames Valley accounted for 567,000 sq ft of office transactions. Reading was the most active market with 225,000 sq ft of take-up, followed by Basingstoke (130,000 sq ft) and Hammersmith. Virgin Media, Sanofi and Ericsson all moved to Reading in 2018. There were 70 medium/large office moves in the wider Thames corridor in the first 9 months of 2019.

Large deals signed included Sovereign Housing Association taking 65,000 sq ft in Basingstoke for a new HQ, Bottomline Technologies taking 58,000 sq ft in Reading and Li Fung agreeing a deal for a 50,000 sq ft move to White City, London, W12. There were smaller moves involving Gartner in Staines, GTT Communications, Eteach, MyWorkSpot and Orega. The technology, media and telecom (TMT) sector was the most active with 25% of space taken, while the serviced office sector was relatively subdued.

JLL also draw attention to the growing life sciences sector. The White City area has recently attracted office deals from Novartis, Autolus, GammaDelta and Synthace. Metropolis is tracking up to 20 confirmed and potential requirements in this sector.

Across the Thames Valley, Metropolis is speaking to nearly 900 office occupiers that have lease expiries approaching in west London, Surrey, Berkshire and Buckinghamshire in the next two years.

Just over 800,000 sq ft of speculative office space has been completed so far during 2019, but this compares to over 1.7m sq ft in previous years. In the first half of 2019, some 700,000 sq ft of office space went under construction, although much of this was in refurbishments. Mapletree is speculatively developing 400 and 450 Longwater Avenue, Green Park, Reading, both buildings will each comprise 114,000 sq ft. In addition, there are major refurbishments taking place at Arlington Business Park and Thames Valley Park.

Agents say that the shortage of ready-to-occupy new office space is restricting the number of large office moves in the Thames Valley and is leading to a rising number of pre-lets.

 

The Squeeze on Space

A recent report by property consultant DeVono Cressa has revealed that office occupiers taking the best or better space on the market is leading to a dearth in choice for some occupiers. At a macro level the volume of available office space across central London continues to be high at 15.2 million sq ft. The figures are masking the difficulty in matching requirements with the available office buildings.

DeVono say that in the West End there is 3.5 million sq ft available, with just 22% of this is Grade A space. Victoria and Soho are particularly tight for available space. Even in the City where many new buildings are being built, Grade A space in this market is reducing, largely as a result of early-letting and pre-letting of new developments ahead of completion. Occupier searches are increasingly getting earlier in order to secure space, as well as more occupiers being open to fringe locations and taking more space for future expansion.

A noticeable trend in 2019 has been the rise in demand from the legal sector. A high number of active requirements have been launched recently. Whilst only 201,000 sq ft has been let so far this year, more moves are expected as legal firms scour London for space.

Metropolis is currently tracking nearly 50 law firms looking at options for alternative London office space.

The largest deal up to the end of Q2 2019 was 68,275 sq ft taken by Milbank at 100 Liverpool Street, London, EC2. Followed by Cadwalader, Wickerhsam & Taft pre-letting 21,700 sq ft in the soon to be completed 100 Bishopsgate tower. Some 62% of space leased by law firms this year is of Grade A quality.

DeVono Cressa say that in recent months 23 firms have begun a search or will soon start their search. If all firms decide to move, close to 1.9 million sq ft of office space could be let. Some of these requirements could take 2-3 years, as breaks or expiries are approached searches are showing signs of being started early to secure the right space.

The third quarter has seen US law firm Cooley pre-let 75,000 sq ft of tower space at 22 Bishopsgate, expanding from the 26,000 sq ft they currently occupy. Also in the City Kingsley Napley are doubling their space to 51,344 sq ft at the soon-to-be completed 20 Bonhill Street. Legal occupiers are becoming more footloose in their choice of location. More moving to the City and even the Southbank. Moving to newer buildings, newer locations and introducing new ways of working and/or new technologies is expected to facilitate a change. In an industry that is rife with competition for business and talent, all tools need to be deployed to stay ahead.

Metropolis is talking to nearly 100 law firms which have lease expiries or lease break options in the next three years.