Edinburgh Boost

Recent figures on the Edinburgh office market in 2018 revealed that take-up totalled 855,000 sq ft (79,461 sq m) in 2018. This level of office lettings exceeds the ten year average for the fourth year running according to Cushman & Wakefield and just fails to beat the record 1.05m sq ft of office moves registered in 2017.

Some of the larger deals in Edinburgh last year include Baillie Gifford acquiring 60,000 sq ft at Chris Stewart Group’s 20 West Register Street, Royal London taking 47,000 sq ft from Aviva at 22 Haymarket Yards, Artemis taking 13,710 sq ft at Exchange Plaza and law firms Brodies securing 43,000 sq ft and Pinsent Mason taking 25,000 sq ft at BAM/Hermes’ new development at Capital Square. Diageo’s pre-let 11-12 Lochside Place and Charles River expanded at Clearwater House, Heriot-Watt Research Park and now occupy the full building

Metropolis ran 200 leads on Edinburgh occupier’s move intentions including 50 companies searching for alternative space and a further 60 which have yet to decide whether to view space.

The insurance and financial services sectors have been particularly active within Edinburgh, accounting for 45% of Edinburgh’s total take-up – while they typically form an active part of the market this is a 54% increase on the five-year average. Major occupiers are signing deals to pre-let the best new space under construction, leaving limited choice for occupiers coming to lease breaks who want to upgrade.

Vacancy rates have come down even further from 3.55 per cent in Q2 to 3.35 per cent in Q4.

Looking ahead, only future schemes at 2 Semple Street and 80 George Street are capable of providing supply of Grade A office space. However, over the longer term, Edinburgh now has its development hopes pinned on the future of the planned scheme at The Haymarket, following the sale to M&G.

Metropolis is currently tracking 40 Edinburgh based occupiers with future move plans and a further 60 office occupiers which are expected to come to a decision in 2019.

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Birmingham Offices Looking Ahead

Birmingham office market during 2018 saw 754,000 sq ft of office space transacted in 113 letting deals. This was a little down on the 1m sq ft of take-up in 2017 which included a 240,000 sq ft Government letting at Arena Central, but up on the 693,000 sq ft of office moves agreed in 2016.

Major lettings during 2018 included: WSP taking 46,000 sq ft at The Mailbox, BE Group taking 38,000 sq ft at Somerset House, Zurich Insurance taking 23,000 sq ft at Colmore Square and General Dental Council agreeing to move to 22,000 sq ft at 1 Colmore Square.

Metropolis ran 80 leads on Birmingham office moves during 2018, with 25 searches for office space ongoing.

A recent report by Knight Frank highlights notable expansions such as Hogan Lovells have quadrupling the size of its Birmingham office, taking 23,000 sq ft at The Colmore Building. The law firm is taking advantage of the cost benefits such as lower wages and property costs in the city.

Over the last 18 months Birmingham has witnessed an upsurge in flexible office provision. More than 20% of Birmingham transactions (approx 313,000 sq. ft.) have been divided between various flexible models such as co-working, traditional managed centres, and operators who are providing a fixed term, fully serviced office, to identified occupiers. Instant Offices (3 buildings), Spaces (2 buildings) and MSO have been notably active, acquiring a number of locations.

Knight Frank say take-up of Grade A accommodation repeatedly accounts for over 50% of total activity within central Birmingham. High quality space deals are driven in part by the occupiers’ seeking to raise the profile of their business and enhance their staff recruitment potential. The wellbeing of staff and the workplace is shaping occupier decision-making. Access green walls, health and leisure facilities and high quality on-site catering is becoming as important.

Looking ahead, Knight Frank confirm a number of potential lettings are currently in advance talks at city centre office buildings including The Lewis Building, One Colmore Square, The Colmore Building and Baskerville House as well as some pre-let discussions. Metropolis lists a number of the occupiers interested in these schemes.

At developments under construction, including 103 Colmore Row, 3 Snowhill and 2 Chamberlain Square at Paradise, there is a significant level of advanced pre-let discussions with occupiers

London Office Market in 2018

Central London office lettings in 2018 reached just over 12.3m sq ft from 554 mid-large size office transactions (5,000 sq ft+) during the year. The 2018 figure matched the 2017 London take-up total, but with slightly fewer deals.

2018 was characterised by 167 office deals over 20,000 sq ft, which were led by two large deals Facebook in Kings Cross and The Chinese Embassy at the Royal Mint; followed by a clutch of smaller, mainly pre-let deals to Sumitomo, WPP, Sidley Austin and WeWork.

IT and business services topped the table of lettings by sector, compiled by Metropolis, underpinned by the Facebook deal and the large number of lettings to serviced office operators. This was followed by financial services led by lettings to Sumitomo, BGC and TP Icap. Insurance, professional and media were also well represented. Office deals ‘under offer’ in central London remained at 3.1m sq ft, and pending deal volumes are healthy in nearly all sub-markets, with a number of deals pending.

By area, the City accounted for 43pc of the office floorspace let in 2018 at 5.3m sq ft. The West End saw 2.5m sq ft of take-up. Midtown contributed 2.4m sq ft of lettings and Docklands 900,000 sq ft. Current London office demand is calculated to be around 3.7m 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 year, reached a healthy 6.5m sq ft sq ft (53% of the yearly total), as transactions for new space continued their recent strong showing. Availability is dominated by secondhand space in all London markets.

Metropolis research is currently monitoring 645 ‘live’ London office requirements, with pending deals for space of up to 1.4m sq ft due to sign in the next few months.

Details on Metropolis database from Paul Ives at paul@metroinfo.co.uk

Banking and the Office Market

CBRE has just published its report: “Why We Can Bank on London 2018” which looks at subsectors within London’s financial services ‘ecosystem’: investment and retail banks, fintech firms, traditional asset managers and private equity firms and hedge funds. The intentions of occupiers in these sectors make up a large part of the Metropolis weekly office leads output.

The financial sector accounted for 27% of active space requirements by sq ft in autumn 2018

CBRE say Since the EU referendum, banks have continued to commit to London with Deutsche Bank taking 550,000 sq ft and SMBC taking 161,000 sq ft, while Wells Fargo took 220,000 sq ft for its new European
headquarters. However, banks have also been ‘nearshoring’ (moving staff to regional hubs in the UK) with Bank of America, JP Morgan and Deutsche Bank all announcing plans in late 2012 to move 3,000 jobs away from London.

The UK has been ranked first globally for the strongest fintech sector since 2016. It’s largest companies include Funding Circle, a peer-to-peer financing platform for companies and mobile banking service Revolut is achieving ‘unicorn’ status in April 2018 on reaching a valuation of $1.7bn (both companies’ intentions recently featured on Metropolis).  Fast growing Nutmeg is the first firm to offer an online discretionary investment management service in the UK. Fintech firms are dispersed but have tended to cluster in areas such as Canary Wharf and the City, where initiatives such as Level39 provide provide space. The typical lifecycle of a fintech firm begins in low-cost flexible space, usually in fringe locations. Typically, the firm then moves to a larger and more corporate space as it matures. Metropolis has run nearly 40 leads on fintech companies recently.

Private equity and hedge funds. London is the second largest centre globally for hedge fund managers  Over the past 10 years, firms other than banks or traditional asset managers have accounted for 61% of the sector’s total take-up of 27m sq ft in Central London. There are currently over 200,000 sq ft of office requirements live in this sector in central London. Metropolis has brought subscribers over 30 stories about hedge fund companies office move intentions in recent months.

CBRE conclude by forecasting the rise of agile working becoming more widely adopted in the banking sector, increasingly shifting towards more open plan offices and policies such as working from home. Firms are also increasingly considering an area’s wealth of amenities and transport links. For private equity firms in particular this could become a growing trend as they move away from prestige locations such as Knightsbridge and Mayfair to better connected locations.

Metropolis has run over 500 leads on London-based financial sector occupiers relocation intentions in 2018.

Merry Christmas to all Metropolis blog readers.

Paul Ives, Metropolis Head of Research. December 2018

Metropolis Movers October 2018

Metropolis ran 616 business leads on ‘office movers’ in October 2018. If all reported moves were added together the total would exceed 14 million sq ft of office searches and transactions, researched by Metropolis’ unique market-led intelligence research team, last month.

London was the largest region with 300 business leads during month, but there were also strong showings from the North West (61), South East (52) and Yorkshire (52). Financial services, IT and business services were the largest business sectors planning relocations or agreeing moves during the month.

The relocation leads geographically covered the whole UK and provided details of the size of the office occupier, company 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 616 October leads, included those on occupiers Shell UK, IBM, WPP,Jane Street Capital and McCann Worldgroup .

The October 2018 leads included 161 ‘identified requirements’, including 100 in London. Which means that the company confirmed to researchers that it has current or future plans to search for alternative office space. Of these 175 searches, 109 were newly posted office searches, not previously notified to clients.

The most recent research also included 176 ‘potential movers,’ which were mainly longer-term leads on occupiers, considering a future relocation, but the occupier has yet to make a final decision on whether to search.

Most of the remaining stories covered companies that have just 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 2021.

Recent research by Metropolis concluded that a conservative estimate of ‘live’ business tender opportunities on the database in recent months, exceeded £1bn of business.

If you would like some information on flexible Metropolis subscription packages, then please email Andy or Paul at andy@metroinfo.co.uk or paul@metroinfo.co.uk, mentioning ‘Metropolis Blog’

Central London office lettings in October 2018

Central London office lettings in October 2018 reached just over 1.3m sq ft from 55 mid-large size office transactions (5,000 sq ft+) during the month. The October 2018 figure exceeds the current monthly London average of 1m sq ft.

October was characterised by 19 office deals over 20,000 sq ft, which were led by the McCann World Group’s 135,000 sq ft pre-let at 135 Bishopsgate, EC2 along with TP ICAP; BGC Partners signed for 129,000 sq ft at 5 Churchill Place, E14; Axa IM took a 65,000 sq ft pre-let at 22 Bishopsgate, EC3 and DAC Beachcroft took 50,000 sq ft at Walbrook Building, EC4.

Financial services topped the table of lettings by sector, compiled by Metropolis, underpinned by the TP ICAP and BGC Partners deals. This was followed by media led by lettings to McCann and TNS. Insurance, professional and business services were also well represented. Office deals ‘under offer’ in central London remained at 3.8m sq ft, and pending deal volumes are healthy in nearly all sub-markets, with a number of deals pending.

By area, the City accounted for 58pc of the office floorspace let in October 2018 at 750,000 sq ft. The West End saw 140,000 sq ft of take-up. Midtown contributed 100,000 sq ft of lettings and Docklands 130,000 sq ft. Current London office demand is calculated to be around 3.7m 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 a healthy 555,000 sq ft sq ft (43% of the monthly total), as transactions for new space resumed their recent strong showing. Availability is dominated by secondhand space in all London markets.

Metropolis research is currently monitoring 630 ‘live’ London requirements, with deals for space of up to 1.6m sq ft due to sign in the next few months.

Cityoffices is close to completing on its autumn ‘Skyline Survey’ in London. Further details of office scheme planning applications and consents, with scheme by scheme detail are listed on the Cityoffices.net website. Details on Metropolis and the Cityoffices database from Andy King at andy@metroinfo.co.uk

Manchester Offices and the Tech Sector

Knight Frank has recently published a report on Manchester’s  office market and the impact of the technology sector.

The consultant says that the city has evolved a significant tech market. Take-up within the Manchester market over the last five years (2013-17) shows that there were some 144 leasing transactions from occupiers within the IT & Telecoms sector. These deals accounted for more than 770,000 sq ft of office space – that is a volume of space greater than total 2017 take-up across all sectors in 6 of the 10 regional centres that Knight Frank monitor.

Notable transactions include: Amazon, Bet 365, Booking.com and Jaguar Land Rover, Recent research from Tech Nation, reveals that there are in excess of 30,000 digital jobs within the Manchester economy – which on generous space allocations of 1:8 is the equivalent to some 2.5 million sq ft of office space. These firms have a turnover of some £3.2bn – so they are significant contributors to the local and regional economy. The research also shows that Manchester has a vibrant digital eco-system which led to the birth of more than 450 new digital businesses in 2016. When those businesses are formed they have great growth prospects.

A third of Tech Nation’s Northern Tech 100 – that is the fastest growing tech companies in the North of England – are based in Manchester and have an average growth rate of 49% per annum. Four of the companies found on the list have recently let or acquired a total of 80,000 sq ft with a further 17,500 sq ft under offer at the time of writing.

Knight Frank are also aware of active requirements totalling around 100,000 sq ft from companies within the list. Microsoft, for example, have recently taken 100 desks within Bruntwood’s Neo Building
while both Amazon and Alphabet have a small presence in the city.

Over the same 5 year period there were 406 leasing transactions from companies across the 5 tech sub-sectors. They absorbed 1.4 million sq ft of office space over this time.

Knight Frank conclude that as Amazon and the like invest in the healthcare and insurance sectors, for example, the market will see space solutions that were not so long ago regarded as the exclusive domain of a few select, fast-growth tech companies becoming a reality for the many.

Metropolis Research is monitoring around 20 requirements in the Manchester market and 80 potential movers. Some 20% of companies are in the technology sector.