London Docklands Review

Recent research by Cushman & Wakefield on London Docklands office markets revealed that in the second quarter of 2019 826,000 sq ft of office moves were agreed. This is the highest quarterly leasing volume for the area since Q2 2015. The total of 949,000 sq ft for the first half of 2019 is 46% above the five-year first half of the year average of 648,000 sq ft and significantly ahead of the same period in 2018.

The biggest transactions included the 358,000 sq ft pre-let by the European Bank for Reconstruction and Development (EBRD) at 5 Bank Street, which was the largest transaction in Q2. In addition, WeWork’s acquisition of 287,000 sq ft at 30 Churchill Place on a sublease from the European Medicines Agency, also made a large contribution. Consequently, Q2 take-up was dominated by the banking & finance and flexible workspace sectors, which accounted for 40% and 38% of quarterly take-up respectively. The public & government sector (18%) continued to feature, especially in nearby Stratford. There were also moves in Docklands for PKF Littlejohn, London, Borough of Tower Hamlets and Revolut.

Space under offer fell during the quarter, due to the leases signed by EBRD and WeWork. Overall office requirements in Docklands fell to 3.9m sq ft. This total is still 25% above the long term average of 3.1m sq ft, although this total also reflects companies that are also looking at other areas such as the City of London and West End. Business services and banking are the most active sectors in terms of office demand. Metropolis is monitoring office demand from tenants such as Clifford Chance, Citigroup and China Telecom.

Metropolis is monitoring the plans of over 130 office tenants that have lease expiries approaching in the London Docklands area over the next two years.

There is currently 2.9 million sq ft of space under construction in Docklands, of which 1.4 million sq ft (47%) is pre-let or under offer. The total volume of speculative space under construction increased for the second consecutive quarter to 1.5 million sq ft, up from the 1.2 million sq ft at the end of Q1. This was driven by two new starts at the Wood Wharf development: The Market Building (213,000 sq ft) and Frameworks Building, (250,000 sq ft), both due to complete in late 2022.

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Birmingham Review

Recent research from Colliers International saw office move activity in Q2 2019 in central Birmingham rise a substantial 65% on Q1 leasing levels, albeit driven by three large serviced office deals. The total number of agreed deals hit 320,595 sq ft in 30 deals according to the property consultant.

The quarter represents one of the strongest Q2 leasing levels in Birmingham since Q2 2015. The first half of 2019 overall saw 514,000 sq ft leased in 55 deals including Irwin Mitchell taking 46,750 sq ft at the Colmore Building and The Commonwealth Games who took 72,261 sq ft of Grade A space at One Brindleyplace. In Q2, the serviced office sector was responsible for 72% of total take-up. All three of the largest deals this quarter were attributed to WeWork, which leased a total of 229,042 sq ft in three separate deals: 92,670 sq ft over seven floors at 6 Brindleyplace, together with Louisa Ryland House (81,280 sq ft) and 55,092 sq ft at 55 Colmore Row simultaneously setting a new headline rent for Birmingham at £34 per sq ft. The 6 Brindleyplace deal was the largest in the city centre this year.

Without WeWork, the 2nd quarter would have seen take-up levels at their lowest (91,553 sq ft) since Q2 2012. Business services were the second-most active sector in Q2, accounting for 9% of total take-up.
The largest deal was for 8,097 sq ftat 52 Charlotte Street, let to Newhall Charlotte.

Total Grade A take-up totalled 262,587 sq ft, which was heavily skewed by the WeWork deals. Grade A take-up increased by 70% from Q1. Four out of 19 Grade A deals transacted this half was for space greater than 50,000 sq ft. The average Grade A deal size in H1 2019 was 21,935 sq ft.

Metropolis is talking to nearly 60 Birmingham occupiers of 5,000 sq ft or more approaching lease expiries in the next two years.

Agents say that the mover size bracket of 5,000-15,000 sq ft is unlikely to be affected by WeWork or the other serviced office providers, so agents expect to see continued healthy levels of take-up of this size. The 2,000-5,000 sq ft bracket will be watched with particular interest.

London West End Review

Recent research by Cushman & Wakefield on the London West End office market reveals:

West End office lettings in the Q2 of 2019 reached nearly 800,000 sq ft which was 7% above the average for second quarter take-up in the last five years. Across the first half of 2019 this brought total transactions to 1.83m sq ft which was 10% ahead of the five year average and 4.3% up on 2018.

Pre-lets played an important role in total take-up with 24% of space pre-let in the West End including large deals to G-Research, UK Parliament and Li & Fung

The volume of office space under offer in the West End increased to 1.2m sq ft. This was 54% ahead of the five year average and should fuel more deals in the second half of the year. Indeed we have already seen another big West End pre-let, with the 105,000 sq ft pre-leased to Diageo at Great Marlborough Street, London, W1. Further deals have been concluded to the serviced office sector.

Metropolis is monitoring a large number of large West End requirements by occupiers such as: Apollo Management, Technicolour and Ralph Lauren. West End requirements at 4.7m sq ft are well above their  long-term average.

New, Grade A space lettings accounted for 65% of lettings according to C&W. In addition, nearly 50 of the 180 recorded office moves or expansions were over 5,000 sq ft in Q2. Some 20% of the relocations were by office tenants in the financial sector, followed by 19% in the technology and media sector.

Supply of offices is tight in the West End with a vacancy rate of 4% and only one building able to accommodate movers of greater than 100,000 sq ft. There are currently only 28 buildings which are set to be delivered over the next five years, which will have floorplates 15,000 sq ft and over. The majority of available space is in the fringe, Hammersmith and White City. Some 72% of space in the West End currently under construction was pre-let.

 

Central London office lettings in July 2019

Central London office lettings in July 2019 reached 1.1 million sq ft, from 40 mid-large size office transactions (5,000 sq ft+) during the month. The July 2019 deals volume figure is in line with the current monthly London average of 1m sq ft.

July was characterised by 15 office deals over 20,000 sq ft, which were led by BT’s 328,000 sq ft pre-let at One Braham, E1; Diageo’s 106,000 sq ft pre-let at 16 Great Marlborough Street and WeWork’s 88,000 sq ft at Queen Victoria Street.

Telecom topped the table of lettings by sector, compiled by Metropolis, underpinned by the BT pre-let. This was followed by business services led by WeWork, Office Group and Knotel. The food and drink sector was also prominent with the Diageo West End prelet.

Office deals ‘under offer’ in central London rose to 4.1m sq ft, and pending deal volumes are healthy in nearly all sub-markets, with a number of deals in solicitor’s hands.

By area, the City accounted for 60% of the office floorspace let in July 2019 at 615,000 sq ft. The West End saw 319,000 sq ft of take-up. Docklands 76,000 sq ft, Midtown contributed 90,000 sq ft of lettings and Southbank 66,000 sq ft. Current London office demand is calculated to be around 3.9m sq ft in the City and 3.2m sq ft in the West End.

The volume of grade A (newly built or refurbished office space) let during the month, reached 550,000 sq ft sq ft (33% of the monthly total), as transactions for new space maintained the recent strong showing. Availability is dominated by secondhand space in all London markets.

The large number of upcoming lease events in the core has been a key driver to mover activity .Metropolis research is currently monitoring 625 ‘live’ London office requirements, including a large volume of requirements from the banking and finance sectors, with pending deals for space of up to 1.5m sq ft due to sign in the next few months.

Sheffield Update

According to the latest market statistics released by Commercial Property Partners, 57% of office take up in Sheffield in Q2 2019 was ‘out of town’.

The figures released by the commercial property agency showed that 39,304 sq. ft of the total 68,745 sq. ft take up was outside of the city centre. The total for H1 2019 increased to 266,196 sq ft, 34% more when compared to the same period last year.

CPP also reported a particular increase in demand for Grade B facilities, which accounted for 48,280 sq. ft of the total take up, at 70%.

A total of 15 deals occurred over the three-month period, the most significant of which was the take up of 20,000 sq. ft by education publishing house Twinkl at Hallamshire Business Park.

The figures also revealed continued activity within the professional and business services sector, with companies such as Etico Group securing 7,803 sq. ft at St James House, and Gleeson securing 5,510 sq. ft at Europa Court.

Meanwhile, the city region’s growing number of creative industry businesses accounted for 9,735 sq. ft of space, with Egress Software agreeing a five-year lease for a 7,500 sq. ft Grade A suite, following a recent announcement to grow its workforce from 90 to at least 120 people in 2019, and becoming partners of Sheffield Digital.

The development pipeline remains limited. Despite 27,000 sq ft of speculative space being delivered in Q2, Grade A availability remained limited with 85,000 sq ft being marketed in Q2. Works due to complete on just 81,000 sq ft of office space split between Steel City House and the NUM Building.

Sheffield City Council has signed up developer Scarborough International Properties to lead the expansion of the Sheffield Olympic Legacy Park. Over a dozen new buildings planned for Sheffield Olympic Legacy Park. The developer will spearhead the major regeneration project in the lower Don Valley area, initially aiming to build 750,000 sq ft of business space for the sport, health and well-being sector.

Scarborough plans for its first project as preferred development partner a building of around 40,000 sq ft of office space, close to Sheffield Hallam University’s ‘Advanced Wellbeing Research Centre. Scarborough expects to commence work on its building early in the New Year.

Central London Office Market June 2019

Central London office lettings in June 2019 reached 1.05 million sq ft, from 64 mid-large size office transactions (5,000 sq ft+) during the month. The June 2019 deals volume figure is in line with the current monthly London average of 1m sq ft.

June was characterised by 15 office deals over 20,000 sq ft, which were led by Parliamentary Estate’s 97,000 sq ft deal at 64 Victoria Street, SW1; Smith & Williamson taking 87,000 sq ft at  40 Gresham Street, EC2; Squire Patton Boggs taking 61,000 sq ft at Devonshire Place, EC2 and WeWork taking 47,000 sq ft at Hounsditch, EC3.

Professional Services topped the table of lettings by sector, compiled by Metropolis, underpinned by the Smith & Williamson and Squire, Patton Boggs pre-lets. This was followed by financial services led by Liberty and Business Research. The Business Services sector was also prominent with deals to WeWork, Spaces and Knotel

Office deals ‘under offer’ in central London rose to 4m sq ft, and pending deal volumes are healthy in nearly all sub-markets, with a number of deals in solicitor’s hands.

By area, the City accounted for 40% of the office floorspace let in May 2019 at 406,000 sq ft. The West End saw 356,000 sq ft of take-up. Docklands 66,000 sq ft, Midtown contributed 134,000 sq ft of lettings and Southbank 93,000 sq ft. Current London office demand is calculated to be around 3.8m sq ft in the City and 3.1m sq ft in the West End.

The volume of grade A (newly built or refurbished office space) let during the month, reached 349,000 sq ft sq ft (33% of the monthly total), as transactions for new space maintained the recent strong showing. Availability is dominated by secondhand space in all London markets.

Across Q2 2019, there were deals covering 3.3m sq ft of office space, slightly down on 2018, led by the EBRD pre-let at 5 Bank Street in Docklands, followed by Brewin Dolphin in the City and G-Research in the West End. Some 40% of space let in Q2 was in pre-lets. Financial and business services were the two most active sectors.

Metropolis research is currently monitoring 620 ‘live’ London office requirements, including a large volume of requirements from the banking and finance sectors, with pending deals for space of up to 1.5m sq ft due to sign in the next few months.

City of London Update

A recent research update on the City of London office market by property consultant Savills, revealed that office take-up on the 12-month rolling total had reached 6.9m sq ft, the lowest it has been
since July 2017.

Savills say that demand for space in the fringes of the City has been reduced this year, with most large deals concluded in the core area. The largest deal to be signed in the last two months saw the financial group Brewin Dolphin acquire the whole of 25 Cannon Street, EC4 (114, 000 sq ft) with the relocation happening in July 2022. In addition, competitor Smith & Williamson signed for 86,975 sq ft at Gresham St Pauls, 40 Gresham Street, EC2 relocating from their current offices when the scheme completes in Q3 2020. Demand continues to be concentrate on the new schemes with a two tier market evident. For example 100 Liverpool Street has seen deals of 63,000 sq ft to Millbank and 40,000 sq ft to Peel Hunt, achieving higher than average rents for the area. During Q1, construction started on 6-8 Bishopsgate (710,000 sq ft), Ropemaker Place (480,000 sq ft) and 1 Portsoken Street (190,000 sq ft).

The Insurance and Financial services sectors are the mainstay of demand in the City, currently with 27% of the share of take-up, followed by the Serviced Office Provider sector with 18% share, and the Professional services sector in third with 11%.  Tech & Media sector is lagging in 2019. Tech & Media occupiers are thought to be choosing to move into serviced offices, which continue to expand. The Serviced Office
sector has taken 363,000 sq ft of offices in the City, so far this year, up on this point last year by 78% and up on the 10-year average. An example is WeWork acquiring 50,000 sq ft at 2 Minster Court, EC3. The average deal size for the quarter was just 13,621 sq ft, its lowest since 2012. This was due to a lack of larger transactions.

During the first 6 months of 2019 Metropolis ran leads on 180 occupiers looking for alternative office space in the City of London.