Thames Valley gives mixed signals

A new report from Lambert Smith Hampton (LSH) on the Thames Valley office market reveals a mixture of trends.  LSH report 126 enquiries (over 5,000 sq ft) in Q1 2017, an increase of 31% compared with the 96 received in the previous quarter, however these are mainly made up of smaller enquiries and LSH say that requirements for units of over 30,000 sq ft are running well below the long term average.

Take-up in Q1 2017 was 425,352 sq ft, a fall of 3 % from the 439,331 sq ft transacted in the previous quarter and 18.6% below Q1 2016’s total of 522,770 sq ft. The total is below the five-year average take-up of 482,169 sq ft and given the drop in large enquiries, take-up may suffer in upcoming quarters. Large deals included: MediaWorks, White City – 70,000 sq ft acquired by Net-a-Porter and Tor, Maidenhead – 40,000 sq ft letting to Rank Group.  Moves underway include Body Shop, Maersk, Macquarie Bank and EDF Energy.

The active sectors in Q1 2017 were professional (31%), technology, media and communications (25%) and pharmaceuticals (14%).  LSH say that 74% of all office take up in Q1 2017 was centred on just five of the 14 centres – Blackwater Valley, Bracknell, Maidenhead, Oxford and Reading. Reading continues to attract some big names and it’s key Business Parks are home to some of the world’s largest high-tech firms including Microsoft, Oracle, Cisco, Symantec, Logica CMG, Huawei, Veritas and more recently, major corporates such as Bayer and Thales.
Metropolis has published 260 stories about the relocation plans of 260 Thames Valley and South East companies in the last three months; including 75 companies searching for office space. In addition, it has reported on the plans of a further 60 companies that are approaching lease decisions.
The outlook for the Thames Valley seems to be for a slightly muted summer 2017, but with the recent rating revaluation and the nearing of the completion of the Elizabeth line, the near-term will see more occupiers relocating further out of Central London along the Thames Valley from early 2018.

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.

The Magnificent Seven

A recent report from Savills reveals that for a fourth consecutive year, UK regional city office take-up has surpassed the long term average of 9.1m sq ft. Total take-up in 2016 reached an impressive
9.6m sq ft, despite a year of political uncertainty.

The final quarter of regional office take-up in 2017 reached 2.4m sq ft, the strongest quarter since Q2 2015. Roughly the same level of occupational demand was recorded during the first half and second half
of the 2016, with no post referendum slowdown evident.

The most active of the seven major UK cities in 2016 were Bristol and Cardiff, which recorded take-up improvements of 42% and 10% on 2015’s levels respectively, with Cardiff achieving its highest level of take-up in 15 years. A key driver of occupational demand in these cities was the Government Property Unit (GPU) requirements for consolidating public sector bases into regional hubs. Savills expect the GPU to be the key contributor to acquisitions over 100,000 sq ft in 2017 in cities including Birmingham, Manchester, Leeds, Edinburgh and Belfast, during 2017.

The most active business sectors during 2016 were the insurance and financial services sector, accounting for 1.2 million sq ft (15%) of space taken, which marked a record year. Key deals include: Swinton
Insurance taking 165,000 sq ft at 101 Embankment, Manchester, whilst MotoNovo Finance took 72,000 sq ft at One Central Square, Cardiff.
The tech sector remained an important contributor to take-up during 2016 and accounted for 20% of the number of transactions. This sector has traditionally contributed to the smaller end of the market, but also included Co-op Digital acquiring 45,000 sq ft of accommodation in Manchester, while Micro-chip designer, Cirrus Logic’s 70,000 sq ft letting at Quartermile, Edinburgh marked the largest regional tech deal last year. Edinburgh witnessed the highest proportion of tech take-up of all the UK cities.

Metropolis ran 53 medium and large office requirements for Birmingham in 2016, totalling 1.4m sq ft; the totals for other cities were Bristol 66 requirements and 1.6m sq ft; Cardiff 35 requirements and 1.1m sq ft; Edinburgh 65 requirements and 1.5m sq ft; Glasgow 51 requirements and 1.4m sq ft; Leeds 74 requirements and 2m sq ft; Manchester 90 requirements and 2.5m sq ft.
A shortage of Grade A floorspace in city centres,  prompted occupiers to look out of town as total fringe/out of town take-up reaching 2.8 million sq ft, eclipsing the record level set during 2014. Occupiers were also attracted out of town offices due to availability of larger floorplate stock and cheaper rents, particularly in the Manchester and Glasgow markets. Glasgow was boosted by the University of the West of Scotland’s 225,000 sq ft pre-let of the Eco Campus.

Overall, 44% of the 3.6m sq ft of regional office space currently under construction across the UK regions has been pre-let. Examples include PwC’s part pre-let of One Chamberlain Square in Birmingham
There are 8 million sq ft of known lease expiries over the next five years, there also remains underlying demand for new space, with the likely strongest performers for 2017 predicted to be Leeds, Cardiff and Bristol. There is a shortage of Grade A space, particularly in Bristol and Manchester. Top regional rents remain low relative to Central London.

The Metropolis view is that demand is holding up well in regional cities with 130 new requirements added to the database for the seven largest cities outside London in Q1 2017.

Metropolis Law Report Launch

Metropolis is launching its Law Sector Office Activity in London and the UK 2017, today, for clients only.

The report covers Metropolis research on over 430 law firm deals, leases and requirements for London and UK office space researched over the last 12 months.

Key findings include:

Across the UK, there are currently 190,000 sq m (2.1m sq ft) of office requirements from 120 law firms;

There are requirements for over a million sq ft of alternative London office space by over 50 medium and large London law firms.

Outside London, law firm requirements reached 76 searches totalling 105,000 sq m (1.13m sq ft).

The report covers law firms with upcoming searches, those approaching lease expiries over the next two years and recently agreed deals, including a large number of named examples. The report also looks at factors triggering law firm moves and the outlook for the future, based on expansions, mergers and property costs.

See more at http://metropolisleads.uk/

For further details on becoming a Metropolis subscriber email Simon at simon@metroinfo.co.uk

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.