Central London Lettings – August 2017

Central London office lettings in August 2017 reached an exceptional 1.57m sq ft of deals from 58 mid-large size transactions (5,000 sq ft+) during the month. The August figure exceeds the current monthly average of just under 1m sq ft .

August was characterised by 13 office deals over 20,000 sq ft, which included Deutsche Bank’s 470,000 sq ft pre-let at 21 Moorfields, EC2: WeWork’s two pre-lets at The Stage, EC2 and the nearby ‘Shoreditch Exchange’; Kings College London took 73,000 sq ft at Roman Wall House, EC3, and Atos took 42,000 sq ft at Mid City Place, WC1.

Financial services topped the table of lettings by sector, underpinned by the Deutsche Bank deal. This was followed by business services with large deals involvingWeWork. IT services also performed well, helped by the lettings to OpenText and Kobalt. Office deals ‘under offer’ in central London held steady at 3.5m sq ft and pending deal volumes are healthy in nearly all sub-markets.

By area, the City accounted for 68pc of the office floorspace let in August at 1,066,000 sq ft. The West End saw 233,000 sq ft of take-up. Midtown contributed 145,000 sq ft of lettings. Current London office demand is calculated to be around 3.3m sq ft in the City and 2.9m sq ft in the West End.

The volume of grade A (newly built or refurbished office space) let during the month reached 1.2m sq ft (77% of the monthly total), as transactions for new space resumed their recent strong showing.

Metropolis research is currently monitoring 600 London requirements, with deals for space of up to 2.5m sq ft due to sign in the next few months.

Cityoffices and Metropolis are working on an autumn 2017 update to their twice yearly London Skyline report. The update will contain details of dozens of new office schemes under construction, planning applications and consents, with scheme by scheme detail on the Cityoffices.net website. Details on Cityoffices from Andy King at andy@metroinfo.co.uk

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Future Office Demand in Cambridge

Savills has just published a report on the Cambridge market. It reveals that 262,000 sq ft of office and laboratory space was let in the first half of 2017. This includes major deals to Amazon, Heptares and Astex Pharmaceuticals.

Metropolis has recently reported on 30 major planned relocations in Cambridge, including PWC’s pre-let at Station Square, CIE’s huge relocation and a consolidation by Citrix. The Maurice Wilkes headquarters building has a further floor under offer.

In recent years, annual office and laboratory space take-up has reached 620,000 sq ft. Demand is being driven by inward investing and expanding global R&D businesses. With an additional 2,200 office- and laboratory-based jobs forecast over the next five years, some 300,000 sq ft of additional office space is required.

Cambridge’s ability to attract multinational office and lab occupiers in recent years has allowed it to compete with other global cities as a biosciences and pharmaceutical hub.

Recently, £40 million was invested in the cancer treatment firm Bicycle Therapeutics, at Babraham. Of the 10 largest biotech companies in Boston, USA, eight have a Cambridge UK presence.

Savills say that over the next three years, around two million sq ft of office and laboratory developments will be delivered in the Cambridge market. However, only 385,000 sq ft of this is speculative, with the majority lined up for local occupiers. The bulk of speculative space is scheduled to deliver during 2019.

Biomed Realty is developing 108,000 sq ft of speculative grow-on space at Babraham, set to complete during 2019, while more space is also planned at Granta Park. The Bradfield Centre, currently under construction in Cambridge Science Park, will provide 40,000 sq ft of space.

The outlook for the Cambridge office market appears to be continued expansion. Recent announcements and requirements tracked by Metropolis have included growth by the likes of AstraZeneca, Abcam, ARM, Open Cloud, Cambridge Epigenetix, Jellycat, Marshall Aerospace,  CyanConnode and Burall InfoSmart.

Aberdeen, Edinburgh and Glasgow Offices

A recent report from Savills on the Scottish office market, saw lettings reach 1.4m sq ft for the first half of 2017, 20% above the five year half year average.

Savills say that the Aberdeen office market has seen increased letting activity in recent months driven by the increased oil price. Take up during the first half of 2017 reached 238,000 sq ft, exceeding the 2016 full year level. 78% of take up was accounted for by the engineering, oil and utilities sector, up from 17% last year.  Nonetheless there remains ample supply of office space in the Aberdeen market, which has fallen just 3% from end 2016 to stand at 2 million sq ft. Office schemes at the Silver Fin building and Marischal Square are both expected to complete during the second half of 2017, providing 287,000 sq ft of additional speculative offices.

Edinburgh saw the strongest quarter of take up on record during the second quarter of 2017, according to Savills, pushing the half year total to 772,000 sq ft, which was 50% above the five year first half average.
Total city centre take up at half year reached 541,000 sq ft. This was largely driven by the GPU (Government Property Unit) signing a pre-let on 180,000 sq ft of space at New Waverley. Other large scale deals included Computershare signing a pre-let for 41,000 sq ft of space to be refurbished in Four North and Burness Paull regearing on 27,000 sq ft at 50 Lothian Road. Other deals in the out of town market included Standard Life signing for 31,000 sq ft at South Gyle Broadway. Grade A available office space remains scarce in Edinburgh, with only 313,000 sq ft of space remaining,

Glasgow saw office lettings reach 434,000 sq ft across the city centre and out of town markets during the first half of 2017, in line with the five year first half average. The largest deal was the Student Loans Company’s 41,000 sq ft letting of Europa House. Despite modest take up figures for the city centre market, the out of town market saw a number of engineering companies take space, which has accounted for 25% of the wider market take up this year.With a number of large deals under offer in the city centre, such as DWP, take up in Glasgow looks set to reach Savills forecast of 600,000 sq ft for the full year.

Metropolis has published 60 business leads on Aberdeen, Edinburgh and Glasgow occupiers with requirements, looking for office space over the last six months. It is also reporting on nearly 100 office tenants that are ‘potential movers’ as they approach decisions on whether to renew leases or relocate in 2018 and 2019.

Shorter Leases ? More Moves ?

New research from Estates Gazette suggests that office lease lengths are getting shorter and office relocations are becoming more frequent.

The research through EG Data shows that in five of the six big regional cities, average lease lengths, averaged for new and secondhand space, have fallen in the past 12 months compared with the previous 12 months.

OBI Property say: “For new larger requirements of more than 10,000 sq ft, particularly in newly built floorspace, I don’t see much evidence of a change in lease lengths – 10 years with a break at year five – but on the smaller requirements or in older stock, yes, leases are definitely getting shorter.”

EG data shows average Manchester lease lengths down to 6.8 years. Bristol average lease lengths are down from 8.1 to 7.1 years. Leeds leases are down to 5 years. Strutt & Parker/MSCI data suggests the UK average lease length for smaller office occupiers is 4.6 years, with 5.2 for larger occupiers.

Metropolis data suggests an average lease length of just over 6 years. Metropolis has noticed a growing trend of companies extending leases by 2-3 years while other options are assessed

In London, forthcoming lease expiries are set to rise from a relatively low 4.7m sq ft in 2017 to 6.7m sq ft in 2019:

London Lease Expiries (sq ft millions and number of leases due to expire)
2010 2.7 364
2011 3.8 513
2012 4.2 505
2013 5.1 521
2014 6.9 622
2015 6.1 708
2016 6 727
2017 4.3 709
2018 5.9 830
2019 6.7 893
2020 6.5 812

All occupiers with forthcoming leases are researched by Metropolis and clients are updated on tenant intentions.

Central London Lettings – July 2017

Central London office lettings in July 2017 sustained a healthy 820,000 sq ft of deals from 48 mid-large size transactions (5,000 sq ft+) during the month. The July figure is close to the current monthly average of just under 1m sq ft .

July was characterised by 14 office deals over 20,000 sq ft, which included Spotify’s 104,000 sq ft deal at the Adelphi Building, WC2: law firm Withers pre-let 60,000 sq ft at 20 Old Bailey, EC4; Yahoo/AOL took 43,000 sq ft at Mid City Place, WC1 and HSBC pre-let 36,000 sq ft at 7 Cork Street in W1.

IT and tech services topped the table of lettings by sector, underpinned by the Spotify and Yahoo deals. This was followed by professional services with large deals involving Withers and Bazalgette Tunnel. Financial services also performed well, helped by the lettings to HSBC and Redington. Office deals ‘under offer’ in central London held steady at 3.4m sq ft and pending deal volumes are healthy in nearly all sub-markets.

By area, the City accounted for 31pc of the office floorspace let in July at 250,000 sq ft. The West End saw 177,000 sq ft of take-up. Midtown contributed 300,000 sq ft of lettings. Current London office demand is calculated to be around 3.2m sq ft in the City and 3m sq ft in the West End.

The volume of grade A (newly built or refurbished office space) let during the month reached 480,000 sq ft (58% of the monthly total), as transactions for new space resumed their recent strong showing.

Metropolis research is currently monitoring 600 London requirements, with deals for space of up to 3m sq ft due to sign in the next few months.

Cityoffices and Metropolis have just released releasing their twice yearly Skyline report on the London office construction market. The summer report features analysis of the 100 schemes under construction and the trends for the next wave of schemes. Details on Cityoffices from Andy King at andy@metroinfo.co.uk

Patchy Leeds Demand

Demand for office space in Leeds for the first half of 2017 remains similar to the 12 months that preceded it, but trailed the five year average by 18 per cent, according to new research.

The CBRE Leeds office marketview report found that office take-up in the city was 237,165 sq ft in the first six months of 2017.

There were three lettings over 20,000 sq ft; a 46,058 sq ft letting to Burberry at 6 Queen Street, 25,968 sq ft to Willis Towers Watson at 5 Wellington Place and 22,441 sq ft to BW Legal at 1 Apex View.

The majority of take-up in the city was in the sub 5,000 sq ft size band.

Despite the lower level of enquiries in all size ranges, annual take-up is still likely to be a record for Leeds city centre if the pre-let of 350,000 – 380,000 sq ft at Wellington Place to the Government Property Unit goes ahead.

Looking to the second half of the year, demand is expected to be patchy for at least another quarter.

Metropolis has run nearly 40 new requirements for Leeds office space this year, however most searches are small.

3 Wellington Place (109,000 sq ft) is the only new development completing within the next 12 months. Refurbishments available this year, include ‘Platform’ (120,000 sq ft) and 7 Park Row (40,000 sq ft),
which will help the dwindling Grade A market.

Office Moves Planned in July

Metropolis ran 580 business leads on ‘office movers’ in the month of July 2017. 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. London was the largest region with 247 leads during month, but there were also strong showings from the South East (63) and North West (62), Scotland (44). IT services and financial were the two largest business sectors planning relocations or agreeing moves during the month.

The business leads covered the whole UK and provided details of the size of the office occupier, its 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 580 July leads. included those on Citi (Citigroup), HMRC, Credit Agricole and WeWork.

The July 2017 leads included 200 ‘identified requirements’. Which means that the company confirmed to researchers that it has current or future plans to search for alternative office space. Of these 200 searches, 134 were new office searches, not previously notified to clients.

The most recent research also included 130 ‘potential movers’ which were mainly longer-term leads on occupiers, considering a relocation, but have yet to make a final decision on whether to search.

Most of the remaining stories covered companies that have 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 2020.

If you would like some information on flexible Metropolis subscription packages, then please email Simon at simon@metroinfo.co.uk

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Cityoffices.net, the sister property leads service to Metropolis, saw a further 33 stories posted in July, covering new development opportunities planning applications, consents, construction starts and development teams in London and major cities. The database now covers over 200 office schemes in the pipeline for construction starts in 2017-2020.

For more information on Cityoffices, email Andy at andy@metroinfo.co.uk