Edinburgh Boost

Recent figures on the Edinburgh office market in 2018 revealed that take-up totalled 855,000 sq ft (79,461 sq m) in 2018. This level of office lettings exceeds the ten year average for the fourth year running according to Cushman & Wakefield and just fails to beat the record 1.05m sq ft of office moves registered in 2017.

Some of the larger deals in Edinburgh last year include Baillie Gifford acquiring 60,000 sq ft at Chris Stewart Group’s 20 West Register Street, Royal London taking 47,000 sq ft from Aviva at 22 Haymarket Yards, Artemis taking 13,710 sq ft at Exchange Plaza and law firms Brodies securing 43,000 sq ft and Pinsent Mason taking 25,000 sq ft at BAM/Hermes’ new development at Capital Square. Diageo’s pre-let 11-12 Lochside Place and Charles River expanded at Clearwater House, Heriot-Watt Research Park and now occupy the full building

Metropolis ran 200 leads on Edinburgh occupier’s move intentions including 50 companies searching for alternative space and a further 60 which have yet to decide whether to view space.

The insurance and financial services sectors have been particularly active within Edinburgh, accounting for 45% of Edinburgh’s total take-up – while they typically form an active part of the market this is a 54% increase on the five-year average. Major occupiers are signing deals to pre-let the best new space under construction, leaving limited choice for occupiers coming to lease breaks who want to upgrade.

Vacancy rates have come down even further from 3.55 per cent in Q2 to 3.35 per cent in Q4.

Looking ahead, only future schemes at 2 Semple Street and 80 George Street are capable of providing supply of Grade A office space. However, over the longer term, Edinburgh now has its development hopes pinned on the future of the planned scheme at The Haymarket, following the sale to M&G.

Metropolis is currently tracking 40 Edinburgh based occupiers with future move plans and a further 60 office occupiers which are expected to come to a decision in 2019.

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London Relocation Trends

A recent report from Cushman & Wakefield highlighted relocation trends amongst larger companies in the London office market. Findings included:

Companies already based in Central London relocated from a total of 5.8 million sq ft in 2014, committing to 8.2 million sq ft. This equated to positive net absorption of 2.4m sq ft or 42% growth in floorspace occupied, compared with 33% in 2013. Metropolis figures show over 600 relocations to 5,000 sq ft or more in London in 2014.

Media & tech occupiers, followed by the banking and financial sector, accounted for 37% and 27% of total expansion in floorspace.

A shift from West to East was a key trend, with more than half of relocating West End occupiers (55%) moving to one of the City & Docklands submarkets, compared with only four relocations in the opposite direction. The number of West to East moves in 2014 (31) were considerably higher than the previous year (24). The upward trend is expected to continue throughout 2015.

C&W estimates that companies moving into Central London from further afield, together with start-ups, accounted for 12% of total transactions by number or 0.8 million sq ft in 38 deals.

The largest company to relocate to the capital in 2014 was Amazon, who took a further 86,000 sq ft at 1 Leadenhall Court EC3, as a short term option before taking Principal Place EC2. Other key relocations to Central London included Tudor Capital, who prelet 38,000 sq ft at 10 New Burlington Street W1, moving from Epsom and Tesco Digital relocating to Clerkenwell.

Serviced offices are another growing constituent of take-up in Central London, providing flexible office solutions. The sector accounted for 11% of total activity by number this year – 0.9 million sq ft in 37 deals.

Professional & business services companies showed the greatest willingness to move, with 54% (26/48) of large occupiers relocating. Examples included EY’s migration from Beckett House, SE1 to take a prelet at 25 Churchill Place, E14 and GSMA’s relocation from Midtown to 51,000 sq ft at The Walbrook, EC4.

The banking & financial sector saw a relatively high level of loyalty to existing areas with more than half of occupiers by number (58%) remaining committed to their submarkets. Société Générale was the largest financial relocation from the City Core to Canary Wharf while China Construction Bank moved in the opposite direction from Canary Wharf to the City Core. TDR Capital moved from 1 Stanhope Gate W1 to 20 Bentinck Street W1and SEI Investments from 1 Bruton Street W1 to Alphabeta EC2.

Looking ahead, falling vacancy rates and shrinking choice are expected to see companies expanding search areas to more fringe locations such as Hammersmith and White City, Stratford as well as Canary Wharf & Docklands in the short term. A recent Metropolis blog highlighted the increased pull of London Southbank to companies looking for grade A space at a lower rent than City or West End.