Newcastle goes out of town

Office take-up in Newcastle reached 772,000 sq ft in 2014 according to a recent report by consultant BNP Paribas. The figure was 14% above the 5-year average, but 8% down on the 2013 total.

Much of the activity was in the out of town business parks with 546,000 sq ft of transactions outside the city centre according to the property group. For example Utiltywise took 77,000 sq ft at the Cobalt 22 Business Park, while Siemens also took 39,000 sq ft at Cobalt and Cofely took 26,000 sq ft at Quorum.

In town the largest deals were University of Newcastle taking 34,000 sq ft at 89 Sandyford Road and Teleperformance taking 28,300 sq ft at Baltic Place.

Stephenson Quarter’s 34,000 sq ft ‘Rocket’ scheme is the only scheme under construction.

Metropolis is currently tracking around 20 office requirements and forthcoming lease expiries in Newcastle which total around 200,000 sq ft in both city centre and business parks.

Birmingham Boost

A recent report on the Birmingham office market from property adviser BNP Paribas revealed that office take-up in 2014 reached 710,000 sq ft, in the best year for deals since 2008.

Major deals included HSBC Private Bank taking 37,000 sq ft at 120 Edmund Street, Vodafone taking 23,000 sq ft at Colmore Plaza and DAC Beachcroft lease re-gearing at 9 Brindleyplace for 32,261 sq ft. However the stand out deal was HS2 taking 98,000 sq ft of new offices at Two Snowhill for its HQ.

There is very little office space under under construction with the first scheme likely to complete in the city being Brockton Capital refurbishing 50,000 sq ft at the MailBox for late 2015. However, there are a number of outline planning consents in the city centre which could attract occupier demand in the medium-term. rents for the best space are expected to reach £30 psf.

Metropolis has around 400,000 sq ft of office demand listed in Birmingham for 2015, together with a considerable number of lease expiries where tenants are currently making up their minds.  PWC, Deloitte and Browne Jacobson are all taking or finalising deals on space in Birmingham.

Good year for Sheffield

A recent report by property consultant Knight Frank has revealed office take-up of 270,000 sq ft in Sheffield in 2014, compared to 235,000 sq ft in 2013.

The report highlights recent deals such as health technology company Servelec taking 20,700 sq ft at The Straddle building, Westfield Health taking 40,000 sq ft at Milton House and the establishment of a European HQ and contact centre for health assessments by Instant offices into 11,000 sq ft at Northbank.

In addition, it features PwC’s relocation into 7,000 sq ft at No. 1 St Paul’s Place; XLN Communications’ move into 14,500 sq ft at Northbank and Places for People into 7,000 sq ft on the top floor of Saville House.

Metropolis reported on 25 Sheffield moves in 2014 and is tracking 12 companies looking for office space in the city and Rotherham in 2015. Many of the deals involve offices below 5,000 sq ft. Telecom, recruitment, medical and charity sectors are currently the most active. Local agents estimate that there is currently demand for about 225,000 sq ft of offices in the city.

The construction of the St Paul’s scheme remains the only major pipeline development in Sheffield due to complete in spring 2015 which will add 73,600 sq ft of grade A office stock to the City’s supply and is likely to attract some high profile moves.

Construction costs rising

Construction costs for London projects are rising’, according to Aecom’s just-released 2014 London Contractors Survey.

The firm polled main contractors with a combined UK turnover of almost £7bn, plus 16 major subcontractors. The survey concluded that contractors are beginning to decline to tender on up to one in three higher risk projects and push up quotes on others.

Contractors including Laing O’Rourke, Mace, Kier, Brookfield Multiplex, Skanska and Willmott Dixon took part in the survey. Most of which are lined up to start major London office schemes in 2015, as featured in Metropolis and Cityoffice’s recent London Skyline survey.

Metropolis and Cityoffices calculate that there are already 80 london office projects scheduled to start next year, with more schemes at an earlier stage, which could also still start in the next 12 months. The likelihood is that contractors will enjoy more choice over projects to tender for.

The Aecom survey also found contractors moving towards earlier procurement. Some contractors are still proposing lump sum, single stage tender, but the client will pay higher costs.

Refurbishments schemes or complex projects which bring substantial risk for contractors are also attracting fewer bids from contractors according to Aecom.

Penalties for late completion of projects, which were relatively common in 2013, have now largely disappeared.

Aecom is forecasting that 2014 will record 5-6% tender price inflation in London, and is predicting inflation of 5.1% in 2015 and 5.3% in 2016. In previous years prices were falling.

Labour shortages are now the primary driver for price rises, especially in brickwork-related trades. Aecom is predicting that electrical engineers will be the next specialists to see strong pick-up in demand.

The Aecom survey also found that London contractors have on average already secured 71% of their turnover for 2015, which is higher than the 67% secured for 2014 at the same time last year.

Metropolis is forecasting a further rise in speculative projects in 2015, with an increased level of refurbishment and fit-out work driven by a strengthening pipeline of schemes and a large number of occupiers looking to tie-up deals.

The Lighter Side – Part 2

Amongst the hundreds of phone calls and meticulous research work, tracking down around 120 UK firms with plans to move each week, there are some lighter sides to the job of putting together our brand of intelligence-led property business leads every 7 days:

Catch 22: We called one large London company and spoke to the head of operations about a major requirement the firm was rumoured to have: he said he would have no idea who would be dealing with it, we asked to be put through to facilities, he said they have no facilities department, we asked to go to Operations, he said he was Operations, but didn’t deal with “those Operations”

Sometimes you can’t fault companies for their optimism. Metropolis spoke to the owner of one central London building who confirmed that the building would be demolished the following year. Metropolis then spoke to 8 of the 9 tenants who confirmed they were searching or about to search for alternative premises. Initially the junior staff and the 9th firm accepted they would be moving, but despite repeated attempts Metropolis was unable to speak to the office manager. The firm, based on the 2nd floor of the condemned building, was eventually run as a lead, whereupon the evasive office manager complained that he had no had no intention of moving and would renew his lease regardless of the planned demolition.

Then there are the firms which list their address on the their website and when we call them, they say: “oh we moved out of that address months ago”. There is at that point a temptation to then ask if they hold many meetings on the premises and if so, have they noticed an unexplained fall of in the number of attendees?…

One company asked if the company could get someone to call the researcher back. The researcher replied that would be fine and to ask for ‘Sam’. “How do you spell that?” was the follow up question… ‘S’…’A’.. Reasonable question.

One slightly depressing conversation ran along the lines of: Researcher: “I see your lease is due to expire in June 2015, do you have any plans to look at other properties?” Tenant: “No plans at all”. Researcher “Do you think that you’ll negotiate a refurbishment from your landlord as part of the deal to stay?”. Tenant: “Oh no, we wouldn’t want to put him to any trouble..”

When asking one company: who deals with its office, one receptionist said “oh thats Mr Briggs, he’s the caretaker and he changes the loo rolls and everything.” Ok let me put that another way..

When asking when a company is planning to relocate it is surprising how many tenants do not have any idea. One helpfully said “at some point in the future”

Temporary staff are often poorly briefed by the company for whom they are working. Researchers will outline why they are calling and ask to speak to the office manager. The Temp will say “do you have a name?” The researcher will say “I was hoping you could tell me.” To which the temp will say “I don’t know anyone’s names or job titles here I’m just the temp”. I’m guessing that the company’s phones were unusually quiet that morning.

Bristol Offices Bounceback

Office take-up in Bristol reached nearly 300,000 sq ft in the first half of 2014, including 180,000 sq ft of deals in Q2. This compares to only 500,000 sq ft let in the whole of 2013 and local agents are tipping 2014’s total could reach 700,000 sq ft. Recent large deals have included PricewaterhouseCoopers at Glass Wharf, HSBC at Redcliff Quay, Tribal Group at Kings Orchard, National Friendly at Queen Square and Mapfre Abraxas at a undisclosed address in Bristol.

Ovo Energy is on the verge of signing for 70,000 sq ft and there are also a number of other circulating requirements including AXA, EDF, Alcatel, TSB and KPMG. Metropolis is monitoring around 25 companies in Bristol that have medium or large searches either active or potential.

There is around 170,000 sq ft of new grade A offices due for completion by early 2015, including 2 Glass Wharf (92,000 sq ft), 66 Queen Square (59,000 sq ft) and Narrow Quay House (26,000 sq ft). There are also plans to revive the 400,000 sq ft Glassfields office scheme in 2015. However, there are already a number of firms positioning themselves with requirements of 20,000 sq ft upwards positioning themselves to take the space due to be completed in the next 9 months.

Secondhand space has proved popular, especially as Grade A space has been in short supply and office availability overall has fallen to a five year low, causing average office rents to rise 10% to nearly £20 psf.

The outlook is for more Bristol deals as the number of requirements chase a dwindling supply of top grade offices, while a considerable number of lease expiries are expected over 2015-16.