London Movers Uncovered

Cushman & Wakefield has recently published its ‘Movers & Shakers’ report on London office movers in 2016. Metropolis sets the report’s findings in the context of the most recent 140 new, named, London office requirements researched and published on its database over the last three months in 2017.

C&W’s report looks at 249 transactions over 10,000 sq ft in 2016, which accounted for over 75% of all leasing volumes in Central London. These deals totalled 8.1m sq ft and included 160 deals for properties located in the City & East London and the remaining 89 in the West End or West End fringe.

Companies already located in London moved from a total 5.1 million sq ft, taking 8.1 million sq ft, which equated to a net take up of 3 million sq ft or 37% growth. This contrasts with 2015, when companies expanded by 3.2 million sq ft, but overall London take-up was 1 million sq ft higher.

Expansion was evident across all business sectors. The tech sector saw the greatest expansion in 2016, registering 875,000 sq ft of growth. While banking & financial services expanded by 675,000 sq ft. Retail, media, legal and professional also all had a solid year.

Tech companies increased their footprint three-fold in 2016. Apple’s pre-let of nearly 500,000 sq ft of space at Battersea Power Station was backed by deals to Palantir, Adobe, Deliveroo Facebook, Google and Amazon.

The average actual distance moved during 2016 was just over 1.1 miles, which is down on the distances seen in 2014 and 2015.

Aldgate and Whitechapel recorded positive migration, with the area seeing a large increase in in-movers, including 10 moving in. The refurbishment of the White Chapel building and redevelopment of Aldgate Tower were drivers. Elsewhere in the City fringe, the redevelopment of the White Collar Factory and the Bower have continued to attract companies.

Mayfair and St James’s has continually had more out-movers than in-movers, whilst Aldgate and Whitechapel and Canary Wharf and Docklands have consistently had more in-movers than out-movers on balance.

Cushman & Wakefield estimates that companies new to Central London in 2016 accounted for 4% of total transactions by number or 417,859 sq ft and included significant migration from companies such as Salesforce, Amazon and Tableau Software moving into the capital.

Moving onto 2017, 140 companies in central London have confirmed to Metropolis the launching of new office requirements over the last three months. These include 51 from the City, 6 from Docklands, 7 from Southbank, 40 from the West End core, 12 from midtown and remainder from fringe locations.

Again, new requirements saw finance and tech sectors leading the way with more than 20 new requirements each, followed by media, business services and representative bodies.

Some of the largest examples include Hyperion and Deutsche Bank in the City, Misys and American Express in the West End. If all new requirements are combined, then an extra 2.5 million sq ft of new London office requirements were added to the Metropolis database in the February to May 2017 period.

In the new batch of London requirements researched by Metropolis, 60% of the companies searching are looking for more space than currently occupied, suggesting that the net expansion of office space recorded by C&W in 2016 is likely to continue in 2017.

Best Year Yet!

Metropolis broke its own lead number record in 2016, with an exceptional 7120 business leads published between 1st January 2016 and the 31st December 2016.

  • There were nearly 4,900 (69%) new stories on planned moves or projects by companies, not previously run in 2015 or before;
  • The new moves and projects reported in 2016 reached a staggering 135m sq ft, if all were added together;
  • This total includes 1,400 newly identified requirements (nearly 30 each week), as researchers uncovered previously unpublished searches for 22.7m sq ft of office space in 2016;
  • Metropolis identified a further newly researched 1500 companies, occupying 35m sq ft, which are approaching property decisions, potential movers, in 2017 and 2018;
  • A further 1,800 newly researched companies confirmed space had been found and a move date set ranging from 5 weeks to two years away;
  • In addition, a further 2,220 companies updated Metropolis that either a potential search had moved to an active one, or an active search had resulted in a property found and move was being planned.

Overall the regions with most reported office movers and projects were:

London – 3200 (45%)
South East – 831 (12%)
North West – 565 (8%)
Yorkshire – 444 (6%)
Scotland – 438 (6%)

Overall the sectors with the most reported office movers and projects were:

Financial – 712 (10%)
Professional (law, consultant, accountant) – 680 (10%)
Media 664 (9%)
Business Services – 569 (8%)
IT-related – 500 (7%)

In terms of timescale, move dates for relocations completed and future were:

2016 moves now completed – 2,500 (35%)
2017 moves planned – 3,287 (46%)
2018 or later moves planned -1,333 (19%)

NB – All statistics refer to business leads run in 2016 and there remains a considerable number of additional projected moves on the database from 2015 and before, where no significant update was possible in 2016.

London Cityoffices – A Scheme A Day

The Cityoffices.net website brought subscribers one of the best years yet for London office scheme leads with over 250 leads published between January and December 2016 – equivalent to one scheme per working day during the year.

More than 36m sq ft of London office space was either applied for, given consent or went under construction during the year and all was reported on Cityoffices.

Some of the more high profile schemes included:

– Canary Wharf at North Quay, E14;
– Axa Reim at 22 Bishopsgate, EC2:
– Wilmar International’s ‘Number One Tower’ at Undershaft, EC3

And at the other end of the scale 25 refurbishments and small office projects under 20,000 sq ft.

Cityoffices brought contact details for hundreds of players involved each scheme. Starting from the investor/landlords to subsequent planning advisers, architects and eventually project managers, structural, services and property consultants.

Cityoffices brought subscribers timescales for each project, details of site visits and photos for many. In addition, Cityoffices brings details of scheme lettings to incoming tenants and details of pre-lets of space in schemes still under construction.

Cityoffices now has an archive of London projects stretching back to 1998 with all data is set out in an easy to use interactive website complete with weekly news, graphs and analytical tools.

Cityoffices also covers regional markets in Bristol, Birmingham, Leeds, Manchester, Glasgow and Edinburgh.

If you would like to know more about becoming a subscriber in 2017 simply email Andy King at andy@metroinfo.co.uk with ‘Cityoffices’ in the subject line.

Cardiff Demand

In a recent report by Cushman & Wakefield, local agents reveal that Cardiff office occupiers are pushing on with move plans and that no deals have fallen through since the Brexit vote. There is also a strong demand for new space with a number of large requirements active in the city centre.

Office take-up volumes in Cardiff reached 192,000 sq ft in the six months to July 2016 , a 31% increase on H1 2015. HMRC signed a five year lease for 55,000 sq ft across four floors at Brunel House; Cardiff School of Journalism took 2,730 sqm (30,000 sq ft) at No 2 Central Square, Cardiff University took 29,000 sq ft at Friary House and Opus Energy took 1,161 sq m (12,500 sq ft) of offices at 2 Capital Quarter as well as deals to RBS and Studio TRI. In August, MotoNovo Finance took a larger than expected 6,600 sq m (71,000 sq ft) on five floors at the recently completed One Central Square.

Metropolis is tracking around twenty medium or large size office requirements in Cardiff, including Geldards, PWC and Network Rail. In addition there are a further twenty medium/large companies about to make lease decisions in Cardiff.

Legal & General has announced it was closing its offices in Surrey and relocating its workforce between Cardiff and Hove

Grade A office space availability remains low in the city centre which is putting upward pressure on prime rents at £25 per sq ft. JR Smart has started construction of 75,000 sq ft of new offices at 3 Capital
Quarter following the success at 2 Capital Quarter. While buildings such as  2 Kingsway and Golate House are tipped for refurbishment.

From next year, the city will benefit significantly from the electrification of the Great Western Main Line, improving east-west links with London and Bristol.

Leeds market focus

The latest Colliers International report on the Leeds office market revealed a quiet summer 2016 with only 73,100 sq ft of transactions across 25 deals. Some of the larger deals included Plexus Law taking 14,500 sq ft at Joseph’s Well, Slater & Gordon taking 10,000 sq ft at 2 City West, NHS Property taking 10,000 sq ft in Horsforth and Addleshaw Goddard nearly 8,000 sq ft at 3 Sovereign Square.

Total first half take-up in 2016 reached nearly 200,000 sq ft helped by Sky Bet taking 39,600 sq ft at 6 Wellington Place, RSM pre-let 25,000 sq ft at Central Square and Dentsu Aegis secured 13,800 sq ft at the newly refurbished 6 East Parade.

Local agents predict that the Leeds office market will remain slow due to occupier uncertainty and limited upcoming lease events, although there remain a number of active enquiries within the marketplace.

Metropolis is tracking around 40 companies looking for office space in the Leeds area, including HMRC Hub, Willis Towers Watson and Dart Group/Jet2 and some substantial requirements in the professional services sector. In addition, there are around 40 companies approaching lease expiries in 2017 where decisions are yet to be made, including a number of software groups. Further ahead, over half a million sq ft of lease events are scheduled in the next few years

New schemes launched in Leeds earlier this year include 6 Wellington Place, 6 East Parade and 120 Wellington Street. A further 500,000 sq ft has just been completed including 69,000 sq ft at 6 Queen Street, 75,000 sq ft at 5 Wellington Place and 200,000 sq ft at Central Square. Speculative schemes at Kirkstall Forge and Thorpe Park are set to boost grade A availability in the future.

 

Active Belfast

A recent report on the Belfast office market by CBRE revealed record high levels of take-up at 232,000 sq ft from 31 midsize-large deals in the 6 months to July 2016. This was an increase of 165% based on the first half of 2015.

CBRE expect take-up in the remainder of 2016 to remain strong as a good number of deals are ‘under offer’, coupled with the large volume of requirements. CBRE estimate 750,000 sq ft of requirements for the Belfast market, mainly from existing occupiers looking to expand.

Metropolis is currently tracking around 20 requirements from medium or large companies looking for office space in Belfast.

Professional services firms and the public sector make up the majority of the existing requirements. Recent announced moves include lettings to Navinet, Liberty IT, PuppetLabs, Tourism NI, Regus, Genesys, BRS Golf, Genpact, Citi, Arup, EY and Shopkeep.com. Announced expansions include SpotXi, Manage, HighWire Press Inc, Sixty-5, Pearson Management Services and Alert Logic. PwC adding a further 21,200 sq ft to their existing base in Waterfront Plaza. Tullett Prebon intend to develop a new technology centre and create up to 300 new jobs in Belfast.

There is some 800,000 sq ft of available office space in Belfast in July 2016, down 66,500 sq ft over six months. The amount of existing Grade A space is 141,300 sq ft. Schemes due for imminent completion include Linen Lofts in Adelaide Street and Lincoln Building on Great Victoria Street. Both schemes are attracting letting interest. Construction work continues on the 96,000 sq ft City Quays 2 at Belfast Harbour for Q1 2017 completion. Around 215,000 sq ft of Grade A offices are to be developed at Bedford Square by McAleer & Rushe. An application to redevelop 35-47 Donegall Place in Belfast to provide additional Grade A office accommodation has also recently been made. Consent has been gained to build two office blocks at a £55m development on East Bridge Street.

Looking ahead, local agents say the effects of the Brexit decision are still unclear, however, the early signs are that long-term requirements are still moving ahead .

Bristol market on the Rise

A recent report on the Bristol office office market from property consultant Colliers International revealed that office take-up in Bristol in the first half of 2016 reached 380,000 sq ft, which is a substantial 43% up on the first six months of 2015. Bristol is on track to reach take up of 800,000 sq ft by the end of 2016, well above the five year average of 533,000 sq ft.

The strong figures include two recent deals: EDF Energy taking 81,000 sq ft at Bridgewater House, Direct Line purchasing 63,000 sq ft at The Core and 28,000 sq ft in let at Narrow Quay House to Frazer Nash Consultancy. Grade A (new and recently refurbished space) take-up was 123,570 sq ft.  Vacancy levels remain at an all-time low – 7.3% (Bristol) and 7.0% (Grade A) respectively.

Colliers say that Business Services represented 28% of total take-up for the first six months of 2016, while Energy and Utilities were the second most active business sector at 21%, although that 21% comprises
the EDF Energy deal only. The demand for space remains strong, with a good level of significant sized requirements actively seeking high specification centre city offices. HMRC has the single largest requirement of more than 170,000 sq ft.

Metropolis is currently tracking around 40 companies with searches underway in the Bristol area. In addition, around 50 medium/large companies are approaching lease expiries in 2017/18.

Tech and digital companies are also key drivers behind office demand in Bristol, with the BBC, IMBD (owned by Amazon), Hewlett Packard, Just Eat and Huawei all recently choosing to locate in the city

66 Queen Square was the last Grade A office scheme to be completed and only 3,500 sq ft is available. The 95,000 sq ft Aurora scheme, is the only office building under construction and will be delivered in Q4 2017. The 250,000 sq ft ‘Assembly’ office scheme is currently looking for revised planning consent, while the 184,000 sq ft ‘Aspire’ scheme is tipped for a late 2016 start.

Cityoffices and Metropolis Skyline Survey Summer 2016

Metropolis and Cityoffices have completed their bi-annual ‘Skyline’ survey of the central London office development market for the period October 2015 to April 2016. The survey takes a snapshot of central London office construction in Q2 2016 and includes recent completions, recent pre-let activity and looks ahead to future pipeline projects that will shape the next three years.

After an unprecedented 48 office scheme starts in the six months from October 2015, there are now 104 office schemes under construction in central London (compared to 78 six months ago) totaling an increased 13.5m sq ft (11.1m sq ft in September 2015). This 22% increase in London office space under construction was forecast in our autumn 2015 report.

Scheme start surge

The 48 new office scheme starts in Q4 2015 and Q1 2016 saw 4.7m sq ft of new office space go under construction, including major new-builds such as the 800,000 sq ft Banking Factory in Shoe Lane, EC4; the 320,000 sq ft ‘Can of Ham’ at 60-70 St Mary Axe in the City of London and the 275,000 sq ft Fruit & Wool Exchange in E1, which is all pre-let to a major law firm.

The proportion of refurbishments in the office construction market in central London has stabilised. There is currently a 17:83 split by floorspace ratio of refurbishments: new-build. High profile refurbishments started since autumn 2015 include: Helical Bar’s 165,000 sq ft The Tower, EC1 and GPE’s 150,000 sq ft 148 Old Street in EC1. A significant number of refurbishments are continuing to enter the market, but in terms of total sq ft are overshadowed by large new-builds.

The City dominates current office construction with 9m sq ft of new office space in schemes now underway (up from 6m sq ft in autumn 2015). There is now 670,000 sq ft of office space under construction in Kings Cross, with more at site clearance stage. The West End, including Paddington, has 2.3m sq ft under construction and a further 1.5m sq ft of office builds are on-site in Midtown and Southbank.

More demolitions poised

Despite the high number of starts in the last six months there remains a lot of schemes at demolition stage. Currently there is 6m sq ft lined up to start in late 2016 and 2017. In reality, with over 100 further schemes currently at planning consent stage, more schemes will add to these numbers, particularly in 2017 and 2018. Therefore we predict annual London office development completions in 2017 and 2018 could reach 7-8m sq ft.

Looking ahead, some 33 future office schemes are currently at site preparation stage with upto 7.2m sq ft of additional office space due to go under construction in the next 6 months. Many of these schemes will not be completed until 2017, 2018 or 2019, for example schemes such as 8-10 Grafton Street, W1 or Marble Arch Place, however it is clear there is a continuing strong development pipeline.

There are 200 office schemes that are in the current planning pipeline which could start construction by 2018 (listed on our Cityoffices website), assuming no major economic downturn. In total, over 35m sq ft of offices could be constructed by 2020.

Two of the largest schemes which are closest to a construction start and likely to see construction late in 2016 are the Commonwealth Building in New Oxford Street, WC1 and the 400,000 sq ft No.1 Thames scheme in WC2. Current trends suggest a London office ‘completions bulge’ in 2017, including nearly 5m sq ft in the City alone. There are a further 200 office planning consents pending, including schemes such as 8-10 Grafton Street, W1; 55 Gresham Street, W1 and 8-10 New Bridge Street, EC4.

Ready for tenants and fit-out?

In terms of demand for new space in central London, some 5m sq ft (4.4m sq ft in September) of the 13.5m sq ft under construction, has already been pre-let. Recent pre-lettings of under construction space include: DLA Piper at 160 Aldersgate Street, EC1; Colt Telecom at 20 Great Eastern Street in EC2; Farm Group at 58-62 Newman Street in W1; Fred Perry at 29 Mount Pleasant in EC1; New Look and XTC Markets at Building R7 in Kings Cross.

Just over 1.7m sq ft of offices were completed in central London over the last six months, however the increased pace of letting activity has led to over half of the space being let either prior to completion or just after. The largest schemes completed included: the 215,000 sq ft Lacon House, WC1 part pre-let to Arriva; the 188,000 sq ft Zig Zag Building, SW1 where space was pre-let to Jupiter Asset Management and TT Moneycorp and the 170,000 sq ft 8 Finsbury Circus, EC2, part let to Rathbone Brothers and Charles River. Some 40% of office space already pre-let will be occupied by financial services and tech sector companies (see last week’s blog on the rise of this sector). Metropolis is currently tracking nearly 10m of named office requirements in central London.

In total, less than 880,000 sq ft of offices are still available in the 22 London schemes and 1.7m sq ft of offices recently completed in Q4 2015 and Q1 2016. Some 20 different tenants have already signed up for space in the newly-completed developments such as St James Market, 77 Shaftesbury Ave and 1 New Burlington Place. There are currently 3.7m sq ft of offices due for completion in Q2 2016 and Q3 2016, of which 1m sq ft has so far been pre-let. Based on recent trends we would expect a further 1m sq ft or more to be let in these schemes by September 2016.

Conclusion

In conclusion, total office development underway in central London should break through the 15m sq ft ceiling in summer 2016, which would set a recent post recession construction record. The projected 12m sq ft of London office take-up for 2016 looks likely to include over 4m sq ft of grade A new lettings within newly constructed and or refurbished buildings. The number of larger companies now looking further ahead, considering pre-let of space not due for completion until late 2016 or 2017, will sustain a similar take-up pattern in 2016.

In effect, the forthcoming pipeline of schemes for 2017-2019, including the next wave of schemes currently at demolition stage, means that opportunities for pre-letting new space under construction and due for completion in the next three years, has never been greater than at present.

 

High Tech Cambridge

A recent report by property consultant Carter Jonas spotlights the quietly booming Cambridge office market.

Cambridge is the UK’s pre-eminent location for research and development in high value industries such as pharmaceuticals, biotechnology and advanced engineering in software and electronics.

The Cambridge office and lab market enjoyed another strong year in 2015, with take-up exceeding 1.1 million sq ft – surpassing the 956,000 sq ft let in 2014.

Granta Park saw work start on Illumina’s new 155,000 sq ft HQ which will open in summer 2017; while Gilead announced a new 93,000 sq ft building and ARM took 195,000 sq ft at Peterhouse Technology Park in the city’s largest letting. However, the majority of deals recorded were in the sub-10,000 sq ft category.

Deloitte, Thales and Carter Jonas agreed pre-lets at the under construction ‘One The Square’ in central Cambridge, totalling almost half of the 142,000 sq ft building, ahead of its completion in November 2016. In the last year AstraZeneca, Apple and Spotify have all taken space in the city.

Metropolis is monitoring the plans of over a dozen companies with requirements or potential requirements in Cambridge. In addition, Metropolis is planning to speak to a further 100 Cambridge office occupiers with leases due to expire in the next two years.

Office and lab developments with outline planning consent totalled almost 3.8 million sq ft in early 2016. Granta Park is set to expand its 120-acre site with the granting of planning permission to provide 365,000 sq ft of new R&D space.

Forecasts for 2016 include greater competition for available space pushing rents to well over £30psf. Some decentralisation from the the more expensive core to the cheaper fringe areas. The pace of office refurbishment to increase as demand grows.

The Forgotten Market?

With London and the main regional cities grabbing most of the headlines, it is often forgotten that the UK’s business parks also account for a large slice of office relocation activity.

GVA Bilfinger’s 2015 Business Park Review highlights that a total of 2.3 million sq ft of take-up was recorded on UK business parks during the first half of 2015. This infers that in a full year, as much as 5m sq ft of office deals are concluded, which would make business parks as important an office market as the City of London.

Research by Metropolis indicates nearly 200 business park office moves or requirements planned for 2016, with a further 60 lined up for 2017.

In the Midlands 460,000 sq ft of 2015 transactions included significant lettings at Birmingham Business Park to VM Housing for 27,100 sq ft and Changan Automotive for 24,800 sq ft. Worldwide Clinical Trials, the pharmaceutical research company, signed for 26,000 sq ft at Beeston Business Park.

In the North East, over 470,000 sq ft of deals included: Andrew James International taking 72,000 sq ft at Lighthouse View Business Park . At nearby Spectrum Business Park, Great Annual Savings Company Limited took 13,279 sq ft and Durham Housing group took 13,953 sq ft.

In the North West, AMEC took 27,247 sq ft at Washington House at Birchwood Park and Swiss agricultural business Syngenta is taking 33,000 sq ft at The Towers, Didsbury.

In Scotland, Amey Utility and Black & Veatch took space at Buchanan Gate Business Park at Strathclyde Business Park, while Advance Construction purchased Radstock House, taking 18,000 sq ft.

In the South West, NGA Human Resources and Aqualogy both took 10,000 sq ft at Aztec West Business Park in Bristol; Sword Apak, took 20,000 sq ft at Nibley Court on Westerleigh Business Park in Yate and EE and Northgate took further space at Aztec West.

In the South East a key deal was the 100,000 sq ft letting of the Leonardo building at Manor Royal Business Park to Virgin Atlantic Holdings. Sita UK took 29,100 sq ft at CSC’s Royal Pavilion, Aldershot; BTG took 15,993 sq ft at Lakeview on SEGRO’s Watchmoor Park, Camberley. Meanwhile, Gilead took 97,000 sq ft at 2 Roundwood Avenue, Stockley Park, and 10,700 sq ft went to Alexion Pharma at 3 Furzeground Way, Stockley Park.

Business park construction activity is around 1.7m sq ft. However completions during early 2015 amounted to 730,000 sq ft, which is the highest level since December 2009. Current projects include the 140,000 sq ft refurbishment of The Bower, 4 Roundwood Avenue, Stockley Park; 36,400 sq ft at Walnut Tree Park in Guildford and at Farnborough Business Park, 108,200 sq ft of speculative office space is nearing completion.

Metropolis is currently monitoring 208 companies with requirements to relocate to or from office space on UK business parks, from mid 2016 onwards.