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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London West End Autumn 2015 – A Preview

Significant Demand In The Pipeline

This Metropolis blog breaks new ground with an attempt to give clients an insight into the ‘work in progress’ on forthcoming office requirements in the London West End market. In the spirit of those TV autumn trailers, we set out below a flavour of some of the stories we hope to bring Metropolis clients over the next two months.

Some Background

Outstanding, unsatisfied, named office requirements in central London are now estimated by Metropolis to be over 10m sq ft, which is the highest figure since the recession. This can only be an approximate figure as ‘requirements’ cover all types of searches from urgent ones involving tenants in buildings where the lease expires ahead of demolition to half-hearted searches by occupiers who are 90% sure that they will renew the lease, but want to compare the market in order to put some pressure on the existing landlord.

Many of the larger requirements (over 20,000 sq ft) are in advance of lease expiries in 2017-19. However, smaller searches below 10,000 sq ft, are often launched less than 18 months before lease expiry. In many cases the occupier is only looking because it needs more space, has a lease end, or it is affected by redevelopment. The costs of relocation tend to limit the number of ‘sideways moves’ involving a company relocating from one building to another, whilst keeping its occupancy size the same.

Recent West End Activity

Office relocation  activity in London’s West End has been a little muted so far in 2015. Figures compiled by Metropolis show Central London take-up in the 8 months to August was 7.6m sq ft, of which only 2m sq ft was to office space in the West End. Some 140,000 sq ft has been pre-let, 450,000 sq ft is grade A newly completed space, with the remainder secondhand.

Some of the larger deals have included Marshall Wace Asset Management’s 43,000 sq ft pre-let of 131 Sloane Street in Knightsbridge; Richemont’s 38,000 sq ft deal at Walmer House on Regents Street and just last month King.com’s letting of 65,000 sq ft at the recently-completed Ampersand Building on Oxford Street. Facebook is also set to confirm its 217,000 sq ft pre-letting of the under construction Rathbone Square in London, W1, which will be the largest West End letting this year.

What’s Coming Up

We are currently researching a number of promising West End leads which look likely to result in 40 named requirements and potentially 1.6m sq ft of office deals.

The majority of office requirements are for a move in 2016 (29), with the remainder lining up moves for 2017 or 2018. Some 23 occupiers are citing expansion as the trigger for their move, while 16 have lease events and the remainder are consolidating fragmented buildings or downsizing.

In terms of the sector, as the graph below shows, it is the media sector which dominates, followed by IT/e-commerce and financial services, including hedge funds and asset managers. The business services sector also remains important with a steady stream of new requirements from serviced office operators.

 

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Around a quarter of companies are looking in the core areas of Mayfair and St James’s, with a further quarter searching in Victoria. A further 25% are searching Soho and north of Oxford Street up to Kings Cross and Euston with the remainder looking in fringe areas such as Camden or Hammersmith.

By size, around half of the 40 requirements are below 20,000 sq ft, with a third between 20,000 and 50,000 sq ft and the remaining five searches are over 100,000 sq ft.

In Conclusion

There is a healthy pipeline of new requirements being launched in London’s West End this autumn. As would be expected, media companies, hedge funds and asset managers are very active, but these have been joined by some of the large e-commerce and social network companies and business service providers to increase the competition for space. Metropolis is working to research the details of these requirements and will be publishing these online for clients shortly.

 

Copyright Metropolis Property Research Ltd 2015

Metropolis Office Requirements – Q1 2015

9.6m sq ft of demand

The Metropolis team researched over 455 UK company office requirements in Q1 2015, representing 9.6m sq ft of office demand.

5.5m sq ft of this demand was for space in Greater London, 4.3m sq ft of which was demand for central London space. 4.1m sq ft of demand was identified by our team in the rest of the UK.

Demand for City of London space continued to be strong during Q1, with 2.1m sq ft required in over 91 planned office relocations. Four of the top five requirements by size were searches by banks with the other a significant requirement from a major accountancy firm. The top five requirements were moves planned in 2016, 2017 and 2018. EC2 demand made up 42% of the total central London space required.

0.8m sq ft of demand was identified in the West End of London, 0.5m sq ft in London SW1 and 0.3m sq ft in London W1. Two of the top five requirements by size were searches by banking and finance companies. All of the top five largest moves are planned for late 2015 and 2016.

Mid Town office demand was mainly focused on London WC2, with two of the largest requirements centered on this postcode. One of the most significant requirements identified was an 80,000 sq ft HQ search by a TMT company planning a move in 2017.

In London SE1, where 0.3m sq ft of demand was researched, the largest requirement came from a construction group. In E14, a 400,000 sq ft requirement from an investment bank made up 66% of the 0.6m sq ft of total demand for offices in the area.

Banking & Finance sector UK office demand reached 2m sq ft in Q1 2015. The largest searches centered on the City of London and Docklands, although there was a notable search for 175,000 sq ft of space in central Birmingham.

0.8m sq ft of demand was identified from the Technology & Telecoms sector, and similar to banking and finance was largely focused on the City of London. There were however also significant searches for space in Manchester and Newcastle-upon-Tyne.

The largest government requirements were for space outside of central London, the most significant a search for over 400,000 sq ft in Manchester. The largest media sector requirements centered on fringe central London locations and the top three law sector requirements were for space in Birmingham, Manchester and Bristol.

 
Metropolis is currently tracking over 700 unique searches for space in London and over 400 in the rest of the UK.

 

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Central London Office Lettings 2014

Sharddong

Best Year For Deals Since 2007

Metropolis has recently published its latest client newsletter, this month a special report on central London office lettings in 2014. Highlights include:

– Central London deals hit 12.8m sq ft, up 5% on 2013 take-up
– 14 deals were over 100,000 sq ft
– Metropolis is tracking over 700 central London office requirements
– Just over 2m sq ft currently under offer

The newsletter was provided exclusively to Metropolis clients. If you are interested in finding out how Metropolis could help your company win new business please visit us at http://www.metroinfo.co.uk.

Top Ten London Business Sectors

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For the sixth year running, Banking and finance leads dominate the London business sector top ten. The largest search for space emerging from this sector in 2014 was a 300,000 sq ft requirement for HQ offices in London EC3, closely followed by a 200,000 sq ft office requirement in London EC2 and a similar sized requirement from a bank looking in EC4. Total new office demand in London from this sector was 4m sq ft.

Office demand from hedge funds amounted to just under 250,000 sq ft, with the average requirement a search for about 10,000 sq ft and the most popular postcodes London W1, SW1 and WC2. Demand from financial investment firms was 800,000 sq ft, with the most popular postcodes London EC2, EC3 and EC4.

Newly identified office demand from the media sector in London was about 2.5m sq ft. The largest search was a 300,000 sq ft requirement for HQ space in London W6. Other significant searches focused on London EC1 and SE1. The technology and telecoms sector, often grouped with Media under the banner “TMT”, had a similar preference for space in these postcodes, with space in WC1 and N1 also of considerable interest. Technology and telecoms demand for London offices was just over 1.5m sq ft.

 

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London office demand from the law sector remains strong, with 2m sq ft of new requirements identified last year. London EC2 and EC4 remain the most popular postcodes for this sector, although a significant number of 30,000 sq ft searches centered on London WC1 and WC2. There were over 40 confirmed law firm lettings last year, with 50% of firms yet to move.

New insurance sector office demand centered on London EC3, with 700,000 sq ft of space required in this postcode last year, matching 2013 demand. Another 300,000 sq ft was required by this sector, mainly in EC2.

In central London, Metropolis identified just over 14m sq ft of new requirements for offices. 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).

 

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There is currently a healthy level of competition for good quality completed and pipeline space in central London. We expect 2015 to be another good year for London fit-out, as companies continue to occupy space pre-let in previous years.

According to our research office take up in 2014 reached 12.7m sq ft, up 5% on the 2013 total. Take up in 2015 is also likely to be strong, but may not grow again by quite the same margin. Metropolis is currently tracking just over 12m sq ft of live office requirements in London and is picking up moves, on average, over 18 months before a deal is signed.

Copyright Metropolis Property Research Ltd, January 2015

 

Metropolis Office Requirements – Q3 2014

9.5m sq ft of demand

Our team here at Metropolis researched over 370 UK company office requirements in Q3 2014, representing 9.5m sq ft of office demand.

6m sq ft of this demand was for space in Greater London and 4.9m sq ft was demand for space in central London.

Demand for City of London space continued to be strong during Q3, with 2.4m sq ft required in over 60 planned relocations. Three of the top five largest requirements in the City were searches by technology and media companies. EC2 demand made up 37.5% of the total space required.

1.4m sq ft of demand was identified in the West End of London, split equally between requirements for space in London SW1 and W1. Again three of the top five largest requirements were searches by technology and media companies, with two significant searches by financial service sector companies identified.

Mid Town office demand was largely focused on London WC2, with 100,000 sq ft of the 300,000 sq ft required in this postcode attributed to media sector requirements.

Just over 0.6m sq ft of demand was researched in London’s Southbank, 200,000 sq ft of which was triggered by an energy company’s requirement for additional space in the area.

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Similar to H1 results, the Banking & Finance sector is leading the demand for new UK offices, with 1.4m sq ft of requirements in the UK, just over 0.4m sq ft of which is sought in the City of London.

Requirements from media sector companies represented just over 1m sq ft of demand, a 300,000 sq ft requirement in London W1 significantly boosting this figure. Technology & Telecom sector requirements came a close third with 0.9m sq ft of demand. The law sector accounted for 0.8m sq ft of demand and the insurance sector 0.5m sq ft.

 

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Simon Sluszny October 2014

Copyright Metropolis Property Research Ltd

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