London Office Schemes – The Next Wave

The following 10 examples are part of a major ongoing research project on the next 200 London office schemes to be built in central London, forecast to be built 2021-2024:

Skipton House, 80 London Road, London, SE1 – Major 42,000 sq m mixed use scheme planned by London & Regional Properties and designed by Piercy & Company

Panther House, 38 Mount Pleasant, London, EC1 – Panther Securities planning a 6,600 sq m office scheme designed by Cano Lasso Architects

One Fairchild, 201 Shoreditch High Street, London, E1 – Folgate Estates planning a 9,900 sq m scheme designed by Gensler

90 Long Acre, London, WC2 – Northacre have worked up a 9,900 sq m office scheme designed by PLP Architecture

Euston Tower, 286 Euston Road, London, NW1 – London & Sydney is fine-tuning plans for upto 28,000 sq m of offices in a project designed by KPF

Commercial Union House, 1 Long Acre, London, EC1 – GMS Estates planning a 10-storey office building of 11,000 sq m designed by Emrys Architects

56-64 Leonard Street, London, EC2 – Melville Holdings looking to build 8,000 sq m offices in scheme designed by AHMM

Haymarket House, 28-29 Haymarket, London, SW1 – Hermes Investments on the path to a 10,000 sq m office scheme designed by TP Bennett

Suffolk House, 127-129 Great Suffolk Street, London, SE1 – TLS/GSS planning a major refurbishment and extension of the 7,000 sq m building, designed by TDO

Woolworth House, 246 Marylebone Road, London, NW1 – Henderson Park pursuing a 18,500 sq m scheme designed by AHMM

Schemes totalling over 280,000 sq m (30 million sq ft) are in the pipeline for 2020-2024, with more expected to emerge.

 

Paul Ives, Metropolis and Apollo Business Research – November 2019

Pre-letting offices in London

The London office market has seen 42 medium/large pre-lets of office space so far in 2019, totalling 2.5m sq ft, which represents a 20% rise on 2018. With one month to go the 42 pre-lets matches the record from any of the previous ten years. Central London occupiers launching searches further in advance of their planned lease expiries than ever before. Pre-letting has gradually risen in importance and is now accounting for around 25% of London office space being transacted.

Cushman and Wakefield say that pre-letting has historically been an important part of the Central London office market, accounting for 23% of total transactions over 5,000 sq ft between 2009 and 2018. Some 24.4 million sq ft was pre-let across 267 pre-let transactions completed during this period. On average, there were 27 pre-lets each year. The pre-let market will play an increasingly important role in the London office market over the next five years.

Pre-letting has traditionally been more prevalent in the City and City fringe of London than in the West End, with 148 pre-lets and 119 pre-lets, respectively. The average duration between exchange and practical completion was 13 months. Pre-lets for buildings which were under construction, the average duration between exchange
and completion was 9 months.

Many pre-lets tend to involve large-scale occupiers with examples in 2019 including 300,000 sq ft to BT at 1 Braham Street, E1 and 360,000 sq ft to EBRD at Bank Street, E14. This trend has historically been driven by the financial services sector (such as EBRD) taking large pre-lets in the City Core and Canary Wharf. But in the last ten years the most active sector for pre-lets has been the media & technology sector (eg BT in 2019). Followed by banking & financial companies and public & government sector.

Large transactions from several new London market entrants have boosted pre-let volumes in recent years including Apple’s acquisition at Battersea Power Station (475,000 sq ft), Dentsu Aegis’ 312,000 sq ft pre-let at 1 Triton Square and Facebook’s recent signing at King’s Cross (600,000 sq ft).

Last year pre-lets to finance sector companies such as Deutsche Bank at 21 Moorfields (469,000 sq ft), SMBC’s acquisition at 100 Liverpool Street (161,000 sq ft) and TP ICAP’s acquisition of 135 Bishopsgate (122,000 sq ft) dominated the league table.

The City Core has seen the largest volume and the highest total number of pre-let transactions such as Brewin Dolphin and Smith & Williamson, but King’s Cross is becoming a close competitor with virtually all the new office stock pre-let in recent years (Sony Music pre-let 130,000 sq ft this year). In addition, West End submarkets such as White City, Battersea and Nine Elms have attracted pre-lets of a large part of their total stock levels. Stratford has also seen a high level of pre-let activity.

C&W estimate that the total potential size of the development pipeline over the next 5 years is 35 million sq ft, with 10m sq ft already either pre-let or under offer. The prospect is that shortages of completed speculative space could make pre-lets even more popular and a large number of companies are currently at an early stage in London large move searches.

Paul Ives, November 2019

 

Law Sector in London – One Year On

In autumn 2018, Metropolis published a blog on the demand for office space by the law sector in the UK. This piece updates that analysis with a look at current trends.

Large law firm requirements have long been one of the mainstays of the City of London and Midtown office markets, accounting for up to 10% of take up in some years.

Some of the largest moves announced in 2019 included:  Cooley pre-letting 70,000 sq ft at 22 Bishopsgate; Kingsley Napley preletting 51,000 sq ft in Bonhill Street, EC2; Shoosmiths pre-letting 40,000 sq ft at One Bow Churchyard; Cadwalader Wickersham and Taft pre-letting 22,000 sq ft at 100 Bishopsgate, BDB Pitmans taking 38,000 sq ft at 1 Bartholomew Close, EC1;

Research suggests over 2m sq ft could be transacted to law firms in 2020. Searches include: Reynolds Porter Chamberlain looking for 50,000 sq ft in the City of London; Leigh Day & Co looking for 25,000 sq ft in Midtown; Baker Botts, Travers Smith and Fried Frank looking for 30,000 sq ft in the City of London; Covington & Burling is looking for 70,000 sq ft in Midtown; Charles Russell Speechlys looking for 150,000 sq ft in Midtown. More legal sector requirements are emerging every month in London.

As well as quantity, the design of the new offices taken by law firms is interesting. Law firms tend towards a mixture of open plan and cellular offices, with the amount seeing some open plan now over 50%. It is not a style that works for all law firms. More junior staff favour open plan, with senior staff requiring cellular for confidentiality. Advances in technology have supported flexible working by allowing lawyers to move around more freely with portable devices – many now use Bluetooth headsets so they can go to a meeting room for noisy or confidential calls. The design of workspace in law firm offices continues to evolve.

There are 60 medium/large London law firms with lease expiries approaching over the next two years.

Metropolis is tracking over 100 law firms with either identified requirements or potential requirements for relocation from October 2019 onwards.

 

Paul Ives Metropolis and Apollo Business Research

Central London Fit-Out Market in 2019

Metropolis Property Research has carried out some research on the central London fit-out market in 2019.

So far this year to October 2019, there have been 380 office leases signed in central London, where the new office size has been 5,000 sq ft or more. The total London office space occupied in these medium/large deals was nearly 8.5m sq ft. There were 125 deals on newly constructed, newly refurbished or under construction office space (pre-lets). These ‘grade A’ deals have amounted to 4.3m sq ft in the first 9 months of the year. Stand out transactions included  the EBRD’s pre-let of 420,000 sq ft at 5 Bank Street, E14, BT’s 328,000 sq ft at One Braham, E1, WeWork at Churchill Place, E14, Diageo at 16/17 Great Marlborough Street, W1 and various occupiers at 22 Bishopsgate, EC2.

Among the companies winning or tendering for work on major fit-out opportunities this year were ISG (winners of the £40m Diageo fit-out in Soho), Overbury (winners of the Cooley fit-out at 22 Bishopsgate), Collins Construction (Kirkland & Ellis at 30 St Mary Axe); StructureTone (£60m WPP fit-out at Rose Court, SE1); BW (Universal Music at Kings Cross).

No 1 Fit Out Contractor – ISG. ISG has been ranked as London’s No 1 fit out contractor again (consistent with previous surveys). This is 28% market share amongst the named TOP 10 firms.

No1 Fit Out Architect – Gensler. Gensler topped the list this times with a 17% market share.

No 1 Interior Project Manager – Gardiner & Theobald is London’s No 1 project manager on interior fit out projects.  This is 20% market share amongst the named TOP 10 firms.

No 1 Tenants Agent – CBRE. CBRE has been ranked as London’s No 1 tenant agent

Looking ahead, there remain medium/large London office requirements of up to 7.5m sq ft, which could come to fruition over the next two years, with new requirements being added weekly. There is currently over 12m sq ft of London office space under construction, with over 7m sq ft available to let. From past experience, some 50% of this demand could sign for space in newly constructed, or newly refurbished London office space which will continue to present a substantial number of opportunities for 2020.

 

Paul Ives, Metropolis and Apollo Business Research

Glasgow Office Market Update

Glasgow has seen the highest level of office lettings take-up in more than a decade in a new report by property consultancy CBRE. Take-up in Scotland’s largest city during the third quarter of 2019 has been “exceptionally strong”, according to CBRE, totalling just over 352,000 square feet – the highest level of Q3 take-up in more than ten years. The year-to-date total of office leases signed reached 611,712 sq ft. CBRE say that the total take-up for 2019 expected to bypass the five-year average of 700,974 sq ft following the strong Q3 performance.

Metropolis has run 72 leads on Glasgow office movers so far this year, with around 90 lettings recorded of over 2,000 sq ft. Researchers are talking to a further 120 office occupiers with lease expiries approaching in Glasgow over the next two years.

The Q3 figure was significantly bolstered by the letting of 272,858 sq ft at One Central on Argyle Street by JP Morgan Chase. Stream Technologies took 27,000 sq ft at 319 St Vincent Street. Of the remaining 24 deals, over half were under 5,000 sq ft, yet occupier demand for larger buildings remains high, as proven with the number of active requirements ongoing in Glasgow including from serviced office operators.

From total demand of 800,000 sq ft, there is strong underlying demand from the banking & finance sector from occupiers such as Barclays, Aviva and Chubb Insurance. WeWork is believed to be under offer on 77,000 sq ft at 50 Bothwell Street. A number of active larger requirements, should further boost take-up by year end, although in reality a two tier market is operating with demand for Grade B smaller offices more challenging. A greater number of smaller deals points to stable market which is less susceptible to fluctuation, than one driven by large individual deals.

Over the past five years Glasgow has seen employment growth of 19% in the professional, scientific and tech industries, and is forecast to see a further 12% growth over the next five years. This is projected to create an additional 4,000 jobs in these industries, suggesting strong demand from these sectors will continue. This is reflected in the current requirements in the market.

Overall Glasgow city centre office supply has risen slightly and now sits at 1,082,569 sq ft (a vacancy rate of 8.07%), with a further 185,222 sq ft rumoured to be under offer. There is now no ‘new build’ Grade A space available and none due to complete until late 2020.  There are some revamps with 151 West George Street, 55 Douglas Street, Ink Building and Sentinel all currently under refurbishment and due to complete in 2019. However the pressure on good quality space will continue over the course of 2019 and 2020.