Pre-lets on the rise

JLL’s recent London office report reveals that London office take-up reached 2.4 million sq ft in Q1 (Metropolis registered 3m sq ft), lower than the quarterly average but ahead of both the equivalent period in 2017 and the 10 year average for the first quarter.

JLL say that The West End was the strongest performing market, with take-up reaching 932,000 sq ft, the strongest Q1 for three years. City leasing volumes were robust at 1.3 million sq ft, marginally ahead of the equivalent period in 2017.

Pre-letting was a major feature of the market, accounting for nearly a third of quarterly take-up. JLL say that this will remain a feature of the market throughout the year with 45% of the 3.5 million sq ft currently under offer.

Metropolis saw around 40% of office space let being accounted for by pre-lets in the first months of 2018.

Across central London development completions have continued to be quickly absorbed, with 70% of quarterly completions pre-leased or let shortly after completion.

In The City, banking and finance sectors were most active with a 28% share of take-up, buoyed by the largest transaction of the quarter, Sumitomo Mitsui Banking Corporation Europe’s pre-let of 161,000 sq ft at 100 Liverpool Street, EC2. The service industries and professional services sectors were also prominent, accounting for 27% and 25% of quarterly take-up respectively, including major transactions to Sidley Austin LLP, Charles Taylor and Prudential.

In the West End, The TMT and services sectors had the largest share of quarterly take-up with 33% and 25% respectively. Within the services sector, the majority of take-up (63%) involved flexible office providers indicating that this sector is continuing to expand.

To conclude, JLL say that business sentiment remains robust and employment continues to rise strongly

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Metropolis Leads in May 2018

Metropolis ran 557 business leads on ‘office movers’ in May 2018. If all reported moves were added together the total would exceed 17 million sq ft of office searches and transactions, researched by Metropolis’ unique market led intelligence research team. London was the largest region with 245 business leads during month, but there were also strong showings from the South East (71),  North West (45), Yorkshire (39) and Scotland (37) . Business services and financials services were the largest business sectors planning relocations or agreeing moves during the month.

The relocation leads covered the whole UK and provided details of the size of the office occupier, company likely move dates, a description of the reasons for the move, its business sector and full contact details including an address for written inquiries, at least one telephone number and in most cases an email address. Some of the largest planned moves and top picks amongst the 557 May leads, included those on occupiers Chinese embassy, Barclays Bank, Telehouse, Societe Generale and Publicis.

The May 2018 leads included 154 ‘identified requirements’, including 83 in London. Which means that the company confirmed to researchers that it has current or future plans to search for alternative office space. Of these 154 searches, 110 were newly posted office searches, not previously notified to clients.

The most recent research also included 166 ‘potential movers’ which were mainly longer-term leads on occupiers, considering a relocation, but the occupier has yet to make a final decision on whether to search.

Most of the remaining stories covered companies that have just signed for new office space and have set a move date, including some large pre-lets and companies inviting tenders for fit-out contracts. The shortest planned move date is just over a month away, whilst the longest was late 2020.

Recent research by Metropolis concluded that a conservative estimate of ‘live’ business tender opportunities on the database in recent months, exceeded £1bn of business.

If you would like some information on flexible Metropolis subscription packages, then please email Andy at andy@metroinfo.co.uk

M25 Office Market Predictions

Knight Frank has published its Q1 2018 report on the M25 office market.

The report looks at the polarisation of the market into small moves and lettings which is pushing landlords towards the subdivision of buildings into smaller units, alongside the expected emergence of 10-12 large 100,000 sq ft requirements in 2018, many of which will come from technology companies. Knight Frank predicts that many of these searches will end in pre-letting of planned office schemes.

Metropolis is currently tracking some 30 south-east occupiers looking for 25,000 sq ft or more, with a further 20 large companies around the M25, approaching lease events over the next two years. Overall, Metropolis has reported on over 500 office moves in the South East and outer London in the last year.

Knight Frank say the South East office market has a history of occupational demand from the technology sector. In fact, the tech sector has accounted for, on average, 23% of annual office take-up over the last five years and has absorbed some 3.8 million sq ft during that period.

Similarly, occupiers drawn from other sectors have been transformed by the application of new technology to business processes, often fuelling new property requirements.

There were around 60 office deals of over 5,000 sq ft in towns around the M25 in Q1 2018. In west London financial and business services firms account for the largest proportion of take-up over 10 years, 27%. This percentage rises to 29% if considered over the past two years. Most notable is that flexible office providers have quickly gained a strong presence, taking just short of 200,000 sq ft since the beginning of 2016.

Knight Frank conclude that the M25 linked hotspots for office deals over the next year are Brighton, Croydon, Watford and Reading.

Southbank attracts relocations

Hubble, the office and co-working provider, reports that tech startups and other growing SMEs in London are leaving the capital’s best known tech hotspots, including Shoreditch and Soho, while favouring the Southbank. Hubble’s search data suggests that London Bridge (29 percent of all searches) is now the most popular location in London for companies searching for flexible office space in 2018 (a sharp rise from 3.7 percent of searches in 2017), beating Shoreditch with 27 percent of all searches.

Additionally, analysis by Metropolis shows nearly 50 medium or large occupiers launching or renewing searches for offices in London, SE1 since January 2018, compared to 40 in Soho, 30 in Clerkenwell and 25 in the Shoreditch area.

Hubble say that more than 37 percent of searches were for office space in south London, counting London Bridge and the Southbank (8.5 percent). Startups and SMEs are branching out to different creative “hub-spots” within London, but most prominently is an unprecedented shift to south of the river. Searches for London Bridge specifically make up 29 percent of all searches and the Southbank, as a whole, making up 37.5 percent of all search queries.

Meanwhile Soho’s market share dropped from 45.2 percent in 2017 to 23.5 percent in 2018 while Clerkenwell dropped from 26.7 percent to 2 percent.

Hubble’s data is backed up by a recent Knight Frank report which named the Southbank as London’s newest commercial hotspot and claims: “South Bank has followed the trend in brownfield regeneration. Former industrial buildings have been put to new uses”. High quality offices have been developed in recent years, and new transport infrastructure built, which has opened up the market to businesses seeking new headquarters buildings.” Knight Frank say London has seen a 41% increase in small and medium enterprises (SMEs) since 2010, much of which has been driven by a marked increase in funding from venture capital. The growth of the gig economy has led to an increase in freelancing and contract based working. 70% of all transactions to TMT firms in the past five years (by number) have involved units smaller than 5,000 sq ft.

Looking ahead, Metropolis is tracking 140 occupiers of all sizes, which have lease expiries approaching in the next two years in the Southbank area, with a further 800 in neighbouring City and Midtown postcodes.

Thames Valley Office Market Update

JLL’s just published Western Corridor office market report concludes that the Thames Valley enjoyed a solid start to 2018. Take-up across the region totalled approximately 516,000 sq ft, representing an increase of 31% on the corresponding quarter of 2017.

The first quarter of 2018 was characterised by smaller deals, according to JLL. The the majority of activity (80%) taking place in the 10,000 sq ft to 50,000 sq ft size band. Deal numbers increased by 50% from 24 deals in Q1 2017 to 36 deals in Q1 2018.

Metropolis reported on over 30 planned relocations in the M4 corridor in Q1 2018, such as FM Global taking 57,000 sq ft at Voyager Place in Maidenhead; Black+Decker taking 49,000 sq ft at 270 Bath Road, Slough; Panasonic taking 41,000 sq ft at Maxis office scheme in Bracknell; Fora Space taking 28,000 sq ft at Thames Tower, Reading; JDA Software taking 23,000 sq ft and Riverbed Technology 16,000 sq ft at Maxis office scheme in Bracknell; GiffGaff taking 23,000 sq ft in Uxbridge; Quest Software taking 13,000 sq ft at Arlington Square, Bracknell and MBNL at Thames Tower, Reading.

JLL say that supply of office space is flattening, falling below 10m sq ft and this is expected to moderate further over 2018.  JLL also think that availability will decline in 2019 and 2020 as the number of active speculative development schemes reduce.

James Finnis, head of south east office agency at JLL, said: “The Q1 take-up figures represent a solid start to 2018. The 50% increase in the number of deals in Q1 illustrates growing occupier confidence. Occupiers are focused on the best space and there is widespread evidence of tenants trading up but taking less overall sq ft. Flexibility remains important with occupiers wanting to build in options to either grow or downsize. The addition of serviced or co-working space into multi let buildings is a natural extension of this, providing on site swing space.

Metropolis is currently tracking around 50 office searches of various sizes along the Thames Valley and talking to over 100 occupiers with approaching lease expiries in the area.

 

Bristol Office Demand

A recent report from Savills concluded that Bristol experienced a solid year for office market demand in 2017 with 611,000 sq ft of office space taken, 6% above the long term annual average. 57% of take up was signed for during the second half of 2017.

This was driven by Dyson taking 29,000 sq ft with University of Bristol’s letting 27,000 sq ft at 1 Cathedral Square.
The report identifies the recent Simmons & Simmons signing for 27,000 sq ft at Aurora, Finzels Reach as a key move. The 95,000 sq ft speculative Finzels Reach scheme is now 40% pre-let with competition for space intensifying among tenants for the remaining floors.

Bristol’s TMT (Technology, Media and Telecoms) sector took 134,000 sq ft of the office space taken last year, 22% of the city centre total. Savills highlight that 28 of the 30 deals were on floor sizes below 10,000 sq ft, indicating the depth of demand within the sector.

Take up in Bristol’s out of town market reached 425,000 sq ft, 34% above the 10 year average. This was largely driven by Babcock signing for 86,000 sq ft at 100 Bristol Business Park during the final quarter.

Office requirements remain robust in the Bristol market, and Savills expect take up to again reach circa 600,000 sq ft during 2018, 10% above the 10 year annual average.

Metropolis is tracking around 30 tenants with office requirements for Bristol, with a further 50 companies approaching decisions on whether to search.

Metropolis Office Movers in February 2018

Metropolis ran 528 business leads on ‘office movers’ in the slightly  shorter month of February 2018. If all reported moves were added together the total would exceed 15 million sq ft of office searches and transactions, researched by Metropolis’ unique market led intelligence research team. London was the largest region with 235 leads during month, but there were also strong showings from the South East (50),  North West (48), Scotland (42) and Yorkshire (41).  IT and business services were the largest business sectors planning relocations or agreeing moves during the month.

The business leads covered the whole UK and provided details of the size of the office occupier, company likely move dates, a description of the reasons for the move, its business sector and full contact details including an address for written inquiries, at least one telephone number and in most cases an email address. Some of the largest planned moves and top picks amongst the 538 February leads, included those on occupiers Facebook, Anixter, Dar Al Handasah, Novartis and CAF Rail.

The February 2018 leads included 156 ‘identified requirements’, including 82 in London. Which means that the company confirmed to researchers that it has current or future plans to search for alternative office space. Of these 156 searches, 100 were new office searches, not previously notified to clients.

The most recent research also included 151 ‘potential movers’ which were mainly longer-term leads on occupiers, considering a relocation, but the occupier has yet to make a final decision on whether to search.

Most of the remaining stories covered companies that have just signed for new office space and have set a move date, including some large pre-lets and companies inviting tenders for fit-out contracts. The shortest planned move date is just over a month away, whilst the longest was late 2020.

Recent research by Metropolis concluded that a conservative estimate of ‘live’ business tender opportunities on the database in recent months, exceeded £1bn of business.

If you would like some information on flexible Metropolis subscription packages, then please email Simon at simon@metroinfo.co.uk