The Evolution of Office Space

A recent blog from property consultant Savills, looked at the trends for the future of office space and some of the implications for market players. Savills say that the sector has progressed beyond putting a roof over workers’ heads, instead landlords and service providers need to be tuned to meet the needs of modern occupiers in order to attract businesses in an increasingly competitive landscape.

The relationships between landlords, tenants and staff has shifted. Building owners can no longer rely on the fact that they have four walls and a plug socket; but instead have to offer a best-in-class service if they want to entice occupiers to let their space. In turn businesses must provide their employees with a stand-out working environment if they want to both attract and retain the best staff.

So what are the emerging trends

Savills’ last What Workers Want survey showed that the workplace can have a significant impact on employees’ physical and mental health. Some of the measures that have caught the headlines have included running tracks on roofs, yoga studios and health-conscious canteens, but this is just the start. Savills predict more on-site GPs, crèche facilities and lockers for online retail deliveries to maximise employees time and productivity.

As well as the emphasis on wellness, there is also a need for greater sustainability and the impact that space might have on the wider environment. For this reason recycling, waste and energy consumption has never been so important. Metropolis finds increasing numbers of occupiers require office space with high levels of BREEAM standards as well as flexibility.

Metropolis has seen a high level of short leases negotiated in recent years alongside a trend for a floor by floor expansion by occupiers within an existing part-occupied building. In addition, refurbishment tenders incorperate a high level of IT utilisation and are now increasingly including flexibility to provide step free access.

Savills say that ultimately, landlords need to take the lead from the serviced office sector which is constantly adapting to create fresh ways of working to meet occupiers’ changing needs.

 

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Leading the Market – Metropolis Movers

In a short departure from our normal focus on the UK office market, this week Metropolis Blog looks at the Metropolis Movers Leads Service.

Metropolis has become the biggest and best office relocation leads service through its focus on market intelligence lead research.

Unlike other lead providers Metropolis concentrates on non-published, tenant activity led research.

This means utilising hundreds of business sector reports, tapping into industry contacts, drilling deep into property sources and making full use of social media.

The experienced Metropolis team has years of experience of talking to office occupiers and is skilled at uncovering advance information of agency instructions, fit-out tendering, removal, furniture and IT contract opportunities.

Leads are written with an understanding of client needs with clear indications of size, timescale and triggers. In addition, all leads give clients multiple channels to contact the occupier, such as phone, email or Linkedin.

The weekly output of over 130 carefully researched leads is backed by a steady stream of blogs, statistics and reports on trends in the market.

Central London office lettings in July 2018

Central London office lettings in July 2018 reached just over 1.4m sq ft from 41 mid-large size office transactions (5,000 sq ft+) during the month. The July 2018 figure is comfortably above the current monthly London average of 1m sq ft.

July was characterised by 15 office deals over 20,000 sq ft, which were led by the Facebooks’s 600,000 sq ft deal to pre-let 11/21 Canal Reach and Building P2 Handyside Street, N1; WeWork’s 131,000 sq ft deal at Aviation House, WC2 and Houlihan Lokey’s 41,000 sq ft move to 1 Curzon Street, W1.

IT and technology services topped the table of lettings by sector, compiled by Metropolis, underpinned by the huge Facebook deal, plus a deal to Benevolent AI. This was followed by business services led by a number of lettings to WeWork and The Office Group. Financial services, professional and media were also well represented. Office deals ‘under offer’ in central London increased to 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 7pc of the office floorspace let in July 2018 at 100,000 sq ft. The West End saw 276,000 sq ft of take-up. Midtown contributed a record breaking 950,000 sq ft of lettings. Current London office demand is calculated to be around 3.6m sq ft in the City and 3.1m sq ft in the West End.

The volume of grade A (newly built or refurbished office space) let during the month reached 800,000 sq ft sq ft (57% 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 650 ‘live’ London requirements, with deals for space of up to 1.7m sq ft due to sign in the next few months.

Cityoffices is working 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

Metropolis Law Sector Report 2018

Initial findings from the 2018 Metropolis report on office relocation in the UK Law sector revealed that 360 legal sector firms were involved in office property decisions in the year to end 2018.

The survey also found that over 7m sq ft of office space was transacted or required by occupiers searching for alternative space over the last year by law sector firms.

The report found over 120 firms searching for space that were interviewed by Metropolis researchers. Over a half of requirements were prompted by upcoming lease expiries, backed by expansions, mergers and restructuring.

The biggest law sector office deals in London involved leases signed for HQ relocations by Freshfields, DLA Piper, Sidley Austin and Minster Law.

Outside of London, Clyde & Co had the biggest office transaction, with a deal to occupy 69,000 sq ft in the Royal Exchange, Manchester. Simmons & Simmons signed a 12-year lease to occupy the top two floors (27,000 sq ft) of the Aurora building in Finzels Reach, Bristol, from January. Hogan Lovells will take over the eighth floor (23,388 sq ft) of The Colmore Building in Birmingham’s business district, where it currently occupies 7,620 sq ft on the tenth floor.

Leeds will house a relocation by Walker Morris, which announced that its 500 staff, who are currently split across two buildings in King Street, will relocate to a flagship office in 33 Wellington Street next summer. The building, in the city’s business district, is currently undergoing a comprehensive £10m refurbishment.

In a sign of things to come, Knight Frank points out that magic circle firm Allen & Overy has developed its Fuse incubator in its London headquarters while Mishcon De Reya has created MDR Lab – its programme for tech start-ups in the legal sphere – in its London office.

M25 Office Market Predictions

Knight Frank has published its Q1 2018 report on the M25 office market.

The report looks at the polarisation of the market into small moves and lettings which is pushing landlords towards the subdivision of buildings into smaller units, alongside the expected emergence of 10-12 large 100,000 sq ft requirements in 2018, many of which will come from technology companies. Knight Frank predicts that many of these searches will end in pre-letting of planned office schemes.

Metropolis is currently tracking some 30 south-east occupiers looking for 25,000 sq ft or more, with a further 20 large companies around the M25, approaching lease events over the next two years. Overall, Metropolis has reported on over 500 office moves in the South East and outer London in the last year.

Knight Frank say the South East office market has a history of occupational demand from the technology sector. In fact, the tech sector has accounted for, on average, 23% of annual office take-up over the last five years and has absorbed some 3.8 million sq ft during that period.

Similarly, occupiers drawn from other sectors have been transformed by the application of new technology to business processes, often fuelling new property requirements.

There were around 60 office deals of over 5,000 sq ft in towns around the M25 in Q1 2018. In west London financial and business services firms account for the largest proportion of take-up over 10 years, 27%. This percentage rises to 29% if considered over the past two years. Most notable is that flexible office providers have quickly gained a strong presence, taking just short of 200,000 sq ft since the beginning of 2016.

Knight Frank conclude that the M25 linked hotspots for office deals over the next year are Brighton, Croydon, Watford and Reading.

4000 office moves for 2018-19

Metropolis has broken new records after 7,200 office business leads were published in 2017. If all the office space contained within those leads were added together the total would top 200 million sq ft.

Covering office deals agreed, companies searching for space, those with potential requirements and a small number of key speculative schemes, the 7,200 leads covered the whole UK from the tip of Cornwall to the north of Scotland. Office sizes ranged from 1,500 sq ft for 10 staff to Google’s new 800,000 sq ft London HQ.

Key points:

  • 2,700 company office moves confirmed to have completed in 2017;

 

  • 3,200 office moves are planned for 2018 and 890 office moves already planned in 2019 or later;

 

  • 3,000 companies, including 1,300 with ‘identified requirements’ expect to be making property decisions in 2018 and 2019;

 

IT and media services is the largest sector (800 leads) followed by financial services (600 leads) and professional, including large numbers of accountants and law firms (450 leads). Although the leads are spread over all UK regions, the size of the London office market, means that over 40% of the leads feature relocations, both scheduled and planned in central London. All leads include contact names, telephone numbers and 75% have email addresses, many of which are specific to the decision maker.

Metropolis remains the largest specialist provider of market intelligence led, office market business leads.

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

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

 

Metropolis Xmas Quiz Answers

Metropolis Xmas Quiz Answers

1. Deutsche Bank
2. 1400
3. 12.6m sq ft
4. 75%
5. £135 psf
6. 95
7. Clyde & Co
8. 170
9. ISG
10. 11m

Merry Christmas to all Metropolis Office Market Blog readers !