Metropolis London Skyline Report

The London Wrecking (Christmas) Ball

or “What Comes Down Must Go Up”

abridged

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Metropolis and Cityoffices have completed their bi-annual ‘Skyline’ survey of the central London office development market for the period April 2015 to October 2015. The survey takes a snapshot of the central London office construction in Q4 2015, recent completions, recent pre-letting activity and looks ahead to future pipeline projects that will shape the next three years.

There are now 78 office schemes under construction in central London (compared to 74 six months ago) totaling an increased 11.1m sq ft (9.5m sq ft in April 2015). In the last six months there have been 31 new scheme starts, totaling 3.4m sq ft, including major new-builds such as the 866,000 sq ft 100 Bishopsgate in EC3, the 400,000 sq ft 10 Fenchurch Place in the City of London and the 228,000 sq ft 33 King William Street (33 Central) in EC4.

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The City dominates construction with 6m sq ft of new office space in schemes now underway (up from 4m sq ft in early 2015). There is now 500,000 sq ft of office space under construction at Kings Cross, with more at site clearance stage. The West End, including Paddington, has 2.7m sq ft under construction and a further 600,000 sq ft of office build is on-site in Midtown, but Southbank and Docklands still lag behind the rest of London.

The big story is the forthcoming space at demolition stage, with over 7m sq ft lined up to start in early 2016 and more to follow later in the year. In reality, further schemes currently at planning stage will add to these numbers, particularly the 2017 and 2018 totals. Therefore we expect development completions in 2017 and 2018 could reach 7-8m sq ft.

Looking ahead, some 33 future schemes are currently at site preparation stage with 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 or 2018, however it is clear there is a strong development pipeline.

 

The full Skyline report is currently available to Metropolis clients. Further details on the Metropolis service can be found at http://www.metroinfo.co.uk.

Copyright Metropolis Property Research Ltd 2015

 

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Metropolis 2014 Lead Research Review

1,000 new office requirements

The Metropolis research team produced a total of 6,154 relocation, construction and refurbishment leads in 2014. Over 26% of these were active UK office space requirements, in line with 2013 and 2012 research results. 1,613 office requirements were confirmed in total, with 1,000 new office requirements uncovered by our research. New office requirements accounted for 22.5m sq ft of UK office demand.

60% of Metropolis leads were projects located in the South of the UK (61% in 2013, 63% in 2012, 61% in 2011, 2010 and 62% in 2009), with 40% of lead projects located in Wales, the Midlands, North, Scotland and Northern Ireland. Greater London projects represented 48% of the 2014 lead total, 3% above the 2013 proportion.

 

Leads by region

 

 

 

 

 

 

In Greater London, Metropolis identified just over 18m sq ft of new requirements for offices, with over 800 companies looking for new space. Just over 14m sq ft of this demand was for central London space. The top 5 most sought after postcodes areas by demand were: EC2 (3m sq ft), EC3 (2m sq ft), EC4 (1.6m sq ft), E14 (1.5m sq ft) and W1 (1.4m sq ft).

Office relocation and refurbishment activity continues to be strong in the North West of the UK. Metropolis identified 1.2m sq ft of new office demand in the region, 61% of which was demand for Manchester space. The largest requirements emerged from banking and IT companies.

In the South East (excluding London), the largest office relocation and refurbishment projects were located in Buckinghamshire and Oxfordshire. Demand for new office space in the South East reached 2.4m sq ft and 39% of this demand was for offices in Berkshire.

Leads numbers in Scotland were 28% down on 2013’s record result (120% up on 2012), however the region is still the UK’s 4th most active according to our research. Metropolis identified 800,000 sq ft of new office demand in Scotland as a whole in 2014, 50% of which was centered on Edinburgh.

In Yorkshire and Humberside, just under 700,000 sq ft of new office requirements were identified, with 71 companies looking for new space. Demand for new space in Leeds accounted for just over 500,000 sq ft.

West Midlands lead numbers were largely on par with results over the past three years. Just under 0.5m sq ft of new demand was identified in Birmingham.

In the South West, just under 700,000 sq ft of new office demand was identified. Bristol was the preferred location for large government, education, energy and insurance company moves. Office take-up in Bristol last year reached 1.2m sq ft.

Lead numbers in the North jumped by 22%, the highest number of relocation, refurbishment, and construction projects recorded in that region since 2011. 23% of office demand in the region centered on Newcastle-upon-Tyne.

 

 

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UK Lead Projects by Size

55% of Metropolis leads in 2014 reported on projects over 10,000 sq ft. 46% of leads were made up of projects between 5,000 sq ft and 30,000 sq ft. 74% of leads covered projects over 5,000 sq ft. The increase in lead projects between 1 and 2,000 sq ft was influenced by a significant number of central London office, residential and hotel redevelopment schemes unseating existing tenants.

 

leads by project size

 

 

 

 

Top 10 Business Sectors – UK Relocation and Refurbishment Projects

The Banking & Finance Sector leapt ahead of Technology & Telecoms in 2014 and was the strongest UK business sector in terms of relocation and refurbishment projects. Lead numbers within this sector grew by 7% when compared to 2013, the strongest showing in the last five years. The largest requirements in this sector were unsurprisingly targeted at London space. Four of the top five office requirements were searches by Banks in the City of London. Banks & Financial service companies also had 50,000 sq ft + requirements for office space in Birmingham, Manchester, Southampton and Bristol.

 

top ten business sectors

 

 

 

 

Newly identified demand for office space from Technology and Telecoms companies in the UK hit 2.1m sq ft last year. Requirements for space in London accounted for 50% of this figure. The largest searches for offices outside of London targeted Slough, Glasgow, Warrington, Manchester and Oxford. Office demand from media sector companies, often grouped with Technology and Telecoms under the banner “TMT”, reached 1.5m sq ft. London, particularly SW1 and WC2, was the overwhelmingly preferred location for this sector.

The top ten law firm office relocation projects by size were all located in central London, predominantly the City, particularly London EC4 and EC2. However there were two 70,000 sq ft + requirements for space from this sector in Leeds and a 100,000 sq ft requirement in Manchester.

The industry consensus is that London and the south east outpaced the rest of the UK in 2014 as they are further ahead in the cycle, but the predictions are that the regions will begin to pick up in 2015. This is likely to drive an increase in speculative developments and a rise in rents, which will in turn lead to more demand for offices in regional cities. In London, availability will fall again leading to more development and more relocations to fringe central London locations.

Copyright Metropolis Property Research Ltd, January 2015