Central London office lettings in May 2016

Central London office lettings in May 2016 recorded just under 550,000 ft of deals from 38 transactions during the month. The May figure represents a fall back from the 650,000 sq ft in April and 1.4m sq ft recorded in March as Brexit fears subdued the market further.

May was characterised by 10 office deals over 20,000 sq ft, including Mishcon de Reya at Weston House, High Holborn, WC1; Tata Consultancy at Northcliffe House, Kensington High Street London, W8 and Dentsu Aegis at 10 Triton Street, London, NW1.

IT services topped the table of lettings by sector, helped by the Tata Consultancy deal. This was followed by professional boosted by Mishcon de Reya’s letting. Media and business services are also performing well. Office deals under offer have risen to over 3.2m sq ft and include two large pending deals in the City. Over 40 separate deals are under offer, but seem dependent on the Brexit vote.

By area, the City accounted for only 21pc of the floorspace let in May. The West End had a better month particularly Victoria which saw 5 deals and the West End fringe which saw a further 5 deals. The pace further picked up in Midtown with over 200,000 sq ft let in 10 deals. Current London office demand is calculated to be around 4.6m sq ft in the City and 3.8m sq ft in the West End.

The volume of grade A (newly built or refurbished office space) let during the month reached only 70,000 sq ft (13% of the total), as transactions for newly developed or refurbished space suffered from the slowdown.

Current forecasts suggest that in the event of a Brexit vote, London office lettings will be curtailed for some substantial period, due to market uncertainty.

Metropolis and Cityoffices are tracking a potential 20m sq ft of central London office space completions between 2016 and 2018 in 100 schemes of over 20,000 sq ft.

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Rise of the Media Sector

Metropolis has been undertaking research into the rise in office demand from the media sector in London.

Analysis of office lettings over the past two years shows that media and IT sectors have done much to drive the resurgence of office demand, alongside latterly financial, professional and business services.

The Metropolis research estimates there are currently 80 medium/large office requirements by media firms (advertising, marketing, public relations and broadcasting) in central London, including Sony, ITV and AKQA. Current demand totals 2m sq ft of office lettings over 2015 and 2016 if all current searches come to fruition.

Nearly 1.2m sq ft of central London office space was let to media firms in 2014 including: Havas taking 183,000 sq ft at 3 Pancras Square, Kings Cross; Omnicom’s 168,000 sq ft letting at Bankside 2 Southwark Street; and Euromoney taking 48,000 sq ft at 8 Bouverie Street, EC4.

There is a moderate supply squeeze in supply of new London office space in 2015, with a number of large developments due to complete in 2016. Consequently, finished developments are coming under closer scrutiny and a number of media companies are under offer on recently completed space.

In addition there are a large number of smaller media firms currently based in buildings set for demolition in the next two years. Discussions with Metropolis research suggest a large number of decisions are due to be made in summer 2015.

Looking ahead, Metropolis forecasts that with the combination of lease expiries, expansions, mergers and new market entrants; media sector office moves could reach an average of nearly 1m sq ft per annum in central London over the next few years.

Manchester – Some Years Are Bigger Than Others

A recent report by Savills on the Manchester office market highlighted an increase in office take-up in Q1 2014. Office space transacted in Manchester rose from 215,000 sq ft in the last 3 months of 2013 to 317,000 sq ft in the first quarter of 2014 in 69 deals. Metropolis looks at recent deals and future forecasts.

Manc

Barclays took 80,000 sq ft at Carlyle’s 4 Piccadilly Place scheme and Trader Media took 60,000 sq ft at Ask Development’s No1 First Street. Costain, the construction group, identified new regional office space of 3,437 sq m (37,000 sq ft) to relocate to at Goodman’s 1500 Aviator Way on Manchester Business Park. While Emirates Airways took 2,323 sq m (25,000 sq ft) at Goodman’s Building 1000, also on Manchester Business Park.

Despite the large deals it is the smaller, often sub-5,000 sq ft, moves in Manchester, which make up the majority of the market activity. Local agents put this down to a two tier office market, which includes a large amount of second hand available office stock, whereas newly built or refurbished grade a stock is in short supply.

The Manchester office market is split by local agents into five areas:

  • Core
  • Spinningfields
  • Piccadilly
  • NOMA/Victoria
  • St Peters Square

Manchester’s national and international profile has enabled it to register around 1m sq ft of take-up every year. Local agents believe that there is close to 800,000 sq ft of requirements in the market in Manchester. Metropolis is currently tracking over 40 Manchester searches by local and national companies including PWC, Ticketmaster and Age Concern. If the current pace of lettings is maintained the office take-up total for 2014 could again top 1 million sq ft.