Fit-Out Market Review

CBRE has just published its latest 2018 European Fit-Out Cost Review. Amongst its conclusions are:

Nearly three quarters of companies in the region have looked to boost the space efficiency of existing buildings in the past year, according to CBRE’s Occupier Survey. CBRE expect further evolution of workplace strategies and new approaches to flexible working over the coming years.

Trends include: Space designed to foster more effective collaboration (generating ideas and driving innovation); Space with improved environmental qualities (temperature, lighting, décor, etc.), more attention to ‘wellness’ and smarter use of technology.

In terms of furniture, CBRE say careful planning and programming is essential. This usually involves a move consultant working with client to identify and understand the current set-up, to plan for and accommodate activities critical for business continuity, movement of employees, furniture and equipment. The move consultant will implement a comprehensive communications plan.

In terms of removals CBRE estimate costs in central London vary between 24 euros for a basic move (agile working) within a floor to 136 euros per person for a full desk and IT move between buildings.

In terms of Lease reinstatement (also known as‘dilapidations’), CBRE estimate 200-240 euros per square metre in central London.  assuming moderate wear based on a 1,000 sq m office.

In terms of procurement and interior build, CBRE estimate 25-30 weeks for a UK location for a medium specification 1,000 sq m fit-out project.

CBRE also outline the implications of potential tax savings across various EMEA countries, based on a total expenditure of €2,500,000 for a CAT B fit-out.

CBRE estimate that typical fit-out costs for a 1,000 sq m office range from 1,000 euros per sq m for a low budget move to 2,200 euros per sq m for a high budget London move. These costs would include Cat B fit-out, furniture, security, AV, IT, fees and contingency.  These costs would be around 20% cheaper in Manchester or Glasgow.

Metropolis leads provide a stream of notifications on fit-out tendering opportunities and contract awards. It has published 100 such leads in the last 3 months.

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Best quarter for Aberdeen

Recent research from CBRE reveals that in the third quarter of 2016, office lettings in Aberdeen reached 66,174 sq ft. This total made it the best performing quarter in Aberdeen so far this year.

The cumulative Aberdeen take-up volume for the first nine months of 2016 was 152,683 sq ft, below average levels for the end of the third quarter. The low oil price continues to impact on office demand although a recent increase in crude prices to $51, is signalling a possibly better year ahead.

The largest Aberdeen letting to take place in Q3 saw serviced office operator Citibase acquire a 22,000 sq ft west end office building at 9 Queens Road. Within the city centre, another floor of nearly 6,000 sq ft has been let to HM Ministry of Justice at AB1, Orega, the serviced office provider, has signed to take 26,000 sq ft on the 1st and 2nd floors at the under construction, 9-storey ‘Silver Fin’ office scheme in Aberdeen.

Metropolis is tracking around a dozen office searches and potential searches in Aberdeen.

Total office space available at the end of the third quarter reached a new high of 2.45m sq ft, which is a year-on-year increase of 45% from Q3 2015. Muse’s 170,000 sq ft Marischal Square development is also under construction and will complete in Q2 2017.

Prime office headline rents in Aberdeen are unchanged at £32 per sq ft, with an absence of recent prime transactions to challenge the current level.

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 .

More Brexit forecasts

CBRE recently published its forecasts on the potential impacts of Brexit following  the EU Referendum. The main points include:

“Brexit” is being predicted to have a negative impact on occupier sectors such as financial services, business services and the tech industries. Market activity in financial services is predicted to be adversely affected by regulation and the possibility that UK-based banks denied opportunities to operate directly in the EU.  UK-based banks have discussed contingency plans to relocate some of their staff out of London. HSBC may move 1,000 investment bankers to Paris. Bank of America Merrill Lynch, Goldman Sachs, and others have also talked about relocations.

Business services (legal, accounting, management consulting) tend to derive revenue from financial services for a substantial part of their business and are often located together in UK cities. Brexit impact on financial services is likely to impact professional services too. Tech industries express concern over limitations on skilled migrant labour. Vodafone has mooted moving its HQ abroad. London‘s tech sector occupiers may be tempted to move to competing European centres. CBRE say that further impact could be felt by the food and hospitality sectors, as they too are exposed to labour market restrictions.

Office market analysts are forecasting The an adverse ‘demand shock’ following the referendum result. Metropolis saw central London take-up halve in the three months leading up to the vote to leave the EU. It is currently too early to assess the impact since the 23rd June, but there is some anecdotal evidence of occupiers putting searches on hold.

CBRE predict that London office demand will fall and rents will be lower than they otherwise would have been. The leave vote will usher in a period of uncertainty in both occupier and investment markets that would last at least two years and possibly more. The optimistic scenario suggests that if the UK successfully negotiates a reasonable trade deal with the rest of the EU central London office rents might actually rise back to previous levels.

CBRE say that impacts on the office market could include jobs being relocated as a direct result of the Leave vote; and jobs which might have been created in the UK but which are created somewhere else because the UK is no longer in the EU. Although economic activity might be depressed more in the short term, the full effect on the occupier market is likely to build over time as leases expire and are not renewed.

CBRE forecast that planned office development will slow, unless a significant pre-let commitment for the scheme has been signed. In Central London over 6m sq ft of office development is underway to complete in 2016, followed by a similar amount in 2017 – but many schemes pencilled in for 2018 and 2019 (which total over 13m sq ft) are likely to be put on hold. Very little of the floorspace due to complete in 2018 and 2019 has actually started on site. It looks likely that many of these schemes will stall until the economic direction becomes clearer.

In conclusion, the impact on the office market is likely to be negative in the short term, but in the medium term the picture is more mixed and it is to be hoped that with a careful economic management, that a soft landing can be achieved.

Law sector expanding outside London

A recent report by property consultant CBRE analyses trends in the legal sector of the office market outside London.

The main points of the survey are:

82% of law firms are seeing increase in fee income (70% in 2014) and 10% of regional office take-up in the last 3 years can be attributed to law firms;

The pressure of competition within the legal sector by new firms such as Riverview Law, Axiom, Obelisk and Keystone Law is leading many firms to review their property occupation, especially in the UK regions;

Recent new office openings have included Latham & Watkins and Freshfields in Manchester, Hogan Lovells in Birmingham, Belfast has attracted Allen & Overy, Herbert Smith, Eversheds and Baker & McKenzie. Legal services firm Axiom has also announced plans to double its Belfast workforce;

Bristol firms occupy the most total legal office space, Manchester has the widest representation of firms in the Top 100; Bristol, Birmingham and Manchester all have over 750,000 sq ft of office space occupied by law firms.

Recently, Manchester and Leeds have seen notably strong letting activity. Manchester saw a 100,000 sq ft deal to Slater and Gordon and 45,000 sq ft for DLA Piper. In Leeds 51,500 sq ft was taken by Addleshaw Goddard, 33,000 sq ft by Squire Patton Boggs and 24,800 sq ft by DAC Beachcroft;

Generally firms in Glasgow and Edinburgh are occupying space at a higher density than counterparts in other UK cities;

‘Nearshoring’ of back office functions from London has led to new regional offices for Trowers & Hamlins, Clyde & Co with Edinburgh based Simpson & Marwick and Slater & Gordon with Chester based Walker Smith Way;

Law firms summarise their ideal space as space which is ‘high tech, high spec, high density’. The survey concludes that law firms are seeking more ‘light, bright, technologically enabled, open plan, collaborative and modern workspace’. Law firms are developing an approach to real estate which aligns it with technology and their approach to workplace design;

Metropolis is currently monitoring 40 law firm office identified requirements outside London, with a further 40 at an earlier stage.

London Fit Out Rankings – 2009 to 2013

Boom to Bust (and Back Again)

London Fit Out 2009-2013

Metropolis Property Research’s latest report on the central London fit-out market is now available.

The report ‘Boom to Bust (and Back Again)’ provides an overview of past and future trends in London and an analysis – with Top 10 rankings – of those firms winning the most business in interior design, project management, fit out, and tenant agency.

In the five years covered by the research (2009-2013) a total of 49.6m sq ft of new office space has been fitted-out in central London.

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For details please contact Simon Sluszny – simon@metroinfo.co.uk

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About Metropolis Property Research Ltd

Metropolis Property Research is an independent research and information company established in 1998.   The company carries out research into the UK and international office markets and corporate moves.  www.metroinfo.co.uk

 

London Fit Out Rankings – 2009 to 2013

Boom to Bust (and Back Again)

London Fit Out 2009-2013

Metropolis Property Research has just released it’s latest report on the central London fit-out market.

The report ‘Boom to Bust (and Back Again)’ provides Top 10 rankings for firms involved in interior design and project management, fit out ‘build’, and agents advising tenants.

The No 1 Ranked TOP 10 firms are:

No 1 Interior Architect  – Pringle Brandon Perkins + Will

Pringle Brandon Perkins + Will has been ranked as London’s No 1 interior architect with 2.7m sq ft of interior fit-out projects 2009-2013.  This is 24% market share amongst the named TOP 10 firms.

No 1 Fit Out Contractor – ISG

ISG has been ranked as London’s No 1 fit out contractor with 3.1m sq ft of fit-out projects 2009-2013.  This is 29% market share amongst the named TOP 10 firms.

No 1 Interior Project Manager – G&T

Gardiner & Theobald (G&T) has been ranked as London’s No 1 project manager on interior fit out projects with 1.9m sq ft of projects 2009-2013.  This is 21% market share amongst the named TOP 10 firms.

No 1 Tenants Agent – CBRE

CBRE has been ranked as London’s No 1 tenant agent with 4.9m sq ft of occupier deals done 2009-2013.  This is 31% market share amongst the named TOP 10 firms.

 

Editorial Notes

In the five years covered by the research (2009-2013) a total of 49.6m sq ft of new office space has been let in central London. Deals over 25,000 sq ft, which are the focus of the analysis, amounted to 24.7 m sq ft, in all 353 projects.

In the report fit-out is defined as being the fitting out of new space for corporate clients who have signed deals for office space in the period 2009-2013 in central London.

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The report Boom to Bust (and Back Again) is available from Metropolis Property Research. The report contains an overview of the London fit out market with full Top 10 rankings and market share analysis.  For details please contact Simon Sluszny – simon@metroinfo.co.uk

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About Metropolis Property Research Ltd

Metropolis Property Research is an independent research and information company established in 1998.   The company carries out research into the UK and international office markets and corporate moves.  www.metroinfo.co.uk

12.03.14