Manchester Offices and the Tech Sector

Knight Frank has recently published a report on Manchester’s  office market and the impact of the technology sector.

The consultant says that the city has evolved a significant tech market. Take-up within the Manchester market over the last five years (2013-17) shows that there were some 144 leasing transactions from occupiers within the IT & Telecoms sector. These deals accounted for more than 770,000 sq ft of office space – that is a volume of space greater than total 2017 take-up across all sectors in 6 of the 10 regional centres that Knight Frank monitor.

Notable transactions include: Amazon, Bet 365, Booking.com and Jaguar Land Rover, Recent research from Tech Nation, reveals that there are in excess of 30,000 digital jobs within the Manchester economy – which on generous space allocations of 1:8 is the equivalent to some 2.5 million sq ft of office space. These firms have a turnover of some £3.2bn – so they are significant contributors to the local and regional economy. The research also shows that Manchester has a vibrant digital eco-system which led to the birth of more than 450 new digital businesses in 2016. When those businesses are formed they have great growth prospects.

A third of Tech Nation’s Northern Tech 100 – that is the fastest growing tech companies in the North of England – are based in Manchester and have an average growth rate of 49% per annum. Four of the companies found on the list have recently let or acquired a total of 80,000 sq ft with a further 17,500 sq ft under offer at the time of writing.

Knight Frank are also aware of active requirements totalling around 100,000 sq ft from companies within the list. Microsoft, for example, have recently taken 100 desks within Bruntwood’s Neo Building
while both Amazon and Alphabet have a small presence in the city.

Over the same 5 year period there were 406 leasing transactions from companies across the 5 tech sub-sectors. They absorbed 1.4 million sq ft of office space over this time.

Knight Frank conclude that as Amazon and the like invest in the healthcare and insurance sectors, for example, the market will see space solutions that were not so long ago regarded as the exclusive domain of a few select, fast-growth tech companies becoming a reality for the many.

Metropolis Research is monitoring around 20 requirements in the Manchester market and 80 potential movers. Some 20% of companies are in the technology sector.

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Law Sector and the Office Market Update

Knight Frank, the property consultant, has just published an update on trends in the law sector over 2017-18 which impact on the UK office market. Some of the main points include:

Consolidator firms such as Gordon Dadds, Redkite Solicitors, Knights and Metamorph Law are acquiring smaller rivals to gain market share. Consolidation activity is driving occupier demand in certain markets as merged firms looked to consolidate into single offices;

Some mid-tier law firms are aggressively expanding, in particular those that have focussed on niche services. One such firm that is forging ahead is Weightmans which has invested £1.3million on new technology over the last year. Another leading mid-tier firm is Fieldfisher who recorded a second consecutive year of double-digit growth that included moving into a single site in London;

New market players are expanding in regional markets. These included Leeds-based Alpaca, who launched in 2017, and Rradar, who relocated to larger office space at the Bruntwood Platform building in Leeds having undergone rapid growth;

Meanwhile, Norton Rose Fulbright revealed plans to create 100 new jobs in its legal process hub in Newcastle, Simmons & Simmons taking larger offices in Bristol, Walker Morris will relocate to 33 Wellington Street, Leeds, Reed Smith opening in Leeds, Graysons moved into larger, more modern premises in Sheffield, Pinsent Masons consolidated their two offices into 141 Bothwell Street in Glasgow, while Hogan Lovells tripled its space in Birmingham;

Manchester recorded the highest legal services sector takeup by square footage across all the UK regional cities at 155,328 sq ft or 13% of total take-up last year. This was followed by Bristol where legal services accounted for 9.4% of total take-up

Knight Frank conclude that changing business structures will demand a resetting of the corporate footprint with most relocating to higher quality office space in core CBD locations.

Metropolis is tracking over 100 law firms with either identified requirements or potential requirements for relocation from October 2018 onwards.

 

Newcastle Office Market

A recent 2017 report by Knight Frank, revealed that Newcastle city centre take-up fell by 15% during 2016 reaching 220,000 sq ft.

Business Services accounted for the largest proportion of city centre take-up in 2016 at 22%. There was also a continued increase in activity in the TMT (technology, media and telecom) sector.

Out of town, total take-up reached 492,000 sq ft, with the North East has attracted an increasing number of ‘footloose’ occupiers in recent years.

Key transactions included a 35,000 sq ft letting to Convergys at The Rocket in the Stephenson Quarter. The most significant deal in the TMT sector was Zerolight’s new lease of the entire LiveWorks development on Newcastle Quayside (15,000 sq ft) only months after the building completed.

Metropolis is monitoring around 20 companies with identified or possible office searches in Newcastle.

Figures from local agent Naylors show 177,041 sq ft of out of town office space in Newcastle was let in Q1 of 2017. In contrast, only 33,461 sq ft of city centre office space was let in the same period. In Q1 2017, Frank Recruitment let 19,000 sq ft at the St Nicholas Building, while Sir Robert McAlpine is taking 8,000 sq ft in the same building.

Out of town, Quorum Business Park secured the largest letting with Sitel taking 47,000 sq ft. Other significant deals included Leeds Building Society moving their regional HQ from Silverlink to Cobalt Business Park and Parseq acquiring 20,000 sq ft at Camberwell House, Doxford Business Park.

The office market in Newcastle remains relatively quiet, with the majority of companies approaching lease events in 2017, choosing to renew current arrangements rather than search for alternative space. Future market growth is likely to mainly come from companies outside the region inward investing and expansions.

Edinburgh prospering

A recent report on the Edinburgh office market by property adviser Knight Frank, concluded that around 120,000 sq ft of offices were let in Q3 2016. The July-September 2016 total was slightly down on the first two quarters of the year, but broadly in line with the same period in 2015 (148,000 sq ft).

Technology, media, and telecommunications (TMT) sector companies were the mainstay in the market, accounting for 49,000 sq ft of the Edinburgh-wide take-up – 41% of the total.

Agreed deals included moves by People’s Postcode Lottery, State Street Bank, Intergen, Cirrus Logic and Zonal Retail Data.

The agents said that appetite for Grade A space (newly completed or refurbished) also “remained voracious in the city centre, with 176,000 sq ft  let in the year to date”. Knight Frank say that Edinburgh could outperform the 220,000 sq ft 10-year average for annual city centre, Grade A office take-up, by the end of 2016.

Metropolis is currently tracking some 35 searches for Edinburgh office space 2016-18.  Current large requirements include Ernst and Young (under offer at Atria), Brodies (60,000 sq ft) and Aberdeen Asset Management (80,000 sq ft).

Agents say: “There is a good level of requirements in the market, particularly for sub-5,000 sq ft accommodation. The level of demand should give developers the confidence to start building. Many will be holding out for pre-let opportunities and, although there have been few in the last decade, we’d expect to see more announced towards the end of 2016.”

Speculative schemes include work nearly completed at Quartermile 3, some delay at the Haymarket scheme, construction planned at One Lochrin Square and a start on Chris Stewart Group’s ‘the Mint’ building, where space is under offer. KF also said that landlords are looking to refurbish their existing stock.

 

London Deals Hit New Heights

Central London office lettings in September 2014 reached 1.3m sq ft in 53 medium or large deals, representing a bounce-back after the traditionally slower August deals month.

The yearly total has reached 11m sq ft already and a 15m sq ft total for 2014 is not out of the question. September was characterised by large lettings to Amazon, Parliamentary Standards Authority and Jupiter Asset Management amongst others.

The retail, professional and financial sectors topped the table of lettings by sector. By area, the City accounted for 74pc of the deals, helped by the large Amazon pre-let. Victoria was boosted by a number of large deals.

The volume of grade A (newly built or refurbished office space) let during the month topped 800,000 sq ft and matches the momentum of new space lettings from earlier in the year.

A survey out this week from Knight Frank reveals that demand from companies looking for London offices has reached a 14 year high, with many requirements from non-traditional sectors. To underline this there are now over 750 active London requirements on the Metropolis database and a further 2-3m sq ft of potential requirements in the pipeline.

London offices leading the economy?

Market updates by four London agents this week suggest the London office letting market is becoming one of the most positive indicators that the UK economy has started recovering.  Just-released data from Knight Frank, Cushman & Wakefield, CBRE and Jones Lang LaSalle points to a second consecutive quarter of above 3m sq ft of office lettings.

The reports use phrases such as “a new cycle” and “the tipping point of the market is close” as part of an upbeat assessment, which includes predictions of a further 1.2m sq ft of deals due to be signed in the next two months, leading to nearly 7m sq ft predicted to be transacted in the City alone, this year, together with a 5% increase in rents.

Metropolis letting figures for London back this up, with office take-up nearly 20% ahead of the same point in 2012 and an increase in the number of central London requirements for 2014 and 2015. However, this is slightly tempered by a shortage of deals in regional cities, which continues to subdue the overall office market activity for the whole UK.