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.

Advertisements

Manchester Update

Recent research by Avison Young and MOAF reveals that Manchester city centre office activity reached 491,300 sq ft during Q2. The figure was 64% above the quarterly average and brings the year to date total to over 800,000 sq ft. Metropolis ran 40 business leads featuring companies relocating in the Manchester market in Q2 2019.

The largest move of the quarter involved Spaces agreeing the largest flexible workspace deal in the UK outside London, taking 122,000 sq ft at 125 Deansgate.  It also understood that BT is close to taking a significant amount of space. Other large moves recently researched by Metropolis included relocations by Hewlett Packard, ME Group, Jones Lang Lasalle and BASF.

There is considerable activity from the flexible workspace sector as WeWork has signed for its fourth location in Manchester, 51,000 sq ft at Hyphen and there are more than half a dozen co-working operators
looking for substantial amounts of space. Business services tends to dominate take-up in Manchester, accounting for a third of take-up.

Advertising and public relations company WPP have committed to 82,000 sq ft which will be constructed at Enterprise City, St John’s. Barclays expanded by 33,000 sq ft at Piccadilly Place. The largest deal in the out-of-town market was to telecommunications company Verastar, which has agreed a 61,000 sq ft deal at One Dovecoat in Sale. Marks & Spencer took 12,000 sq ft at the Alexandra, The Home Office taking 20,490 sq ft at the Soapworks and Capgemini taking 11,360 sq ft at Venus.

Looking ahead, Metropolis is monitoring almost 40 medium/large firms looking for space in Manchester, together with a further 70 tenants approaching lease expiries over the next two years.

There is 1.6 million sq ft of space under construction in Manchester, of which 38% is pre-let. Of the million sq ft of speculative space under construction, key developments include Landmark Oxford Road, 100 Embankment and Circle Square. Grade A remains in good stock with new developments such as 125 Deansgate and Landmark at St Peter’s Square due to complete in 2019. Between them they will bring 305,000 sq ft to the market, 133,000 sq ft of this currently under offer to new tenants.

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.

Thames Valley Update

Recent reports from CBRE and LSH revealed that office deals (take-up) across the Thames Valley region totalled 393,653 sq ft during Q1 2019. Metropolis Research listed 58 ‘space found’ leads during that time as part of 62 recorded deals of 4,000 sq ft and over in the market area.

CBRE say that deal volumes represented a solid start to the year, which is marginally up on the same period in 2018 and in line with the five year quarterly average. The largest deal took place at Ascent 3, Farnborough Aerospace Centre where 45,788 sq ft was let by Discover Financial Services. Other large relocations announced included Gartner taking over 40,000 sq ft at Lovett Road, Staines; Arena taking 37,000 sq ft at Quantum House, Basingstoke; Axa taking 17,000 sq ft in Weybridge and HP taking 30,000 sq ft at Thames Valley Park

CBRE say there is currently 351,014 sq ft of office space under offer (deals about to be signed) across the Thames Valley for space over 10,000 sq ft, the majority of demand in the sub 20,000 sq ft size band. Total office availability at the end of Q1 2019 was 5.7 million sq ft. Grade A supply at the end of Q1 stood at 2.3 million sq ft which is 34% below the five-year average. CBRE have identified four new developments due to
complete in 2019 and say there is already competition for the best existing stock.

In the northern half of the region there were five transactions over 10,000 sq ft in Q1. The largest deal to complete was at The Maylands Building in Hemel Hempstead, where serviced office provider Spaces acquired nearly 25,000 sq ft. Other deals completed in Milton Keynes, including K2, Timbold Drive and The Pinnacle, which both let 19,000 sq ft respectively.

Take-up in the M25 South region in Q1 2019 totalled only 28,030 sq ft. There were two transactions over 10,000 sq ft. Cabot Financial took almost 11,000 sq ft at 35 Kings Hill Avenue, West Malling, while Zoetis Pharmaceuticals acquired just over 17,000 sq ft at Birchwood Building, The Office Park, Leatherhead.

Lambert Smith Hampton identify the Technology, Media and Communications (TMT) sector providing a major source of demand across the South East region. Since the beginning of 2018, it has accounted for almost a third of take-up, well above the next most active sources: Pharmaceuticals, Medical and Healthcare (12%) and Professional Services (10%). Whilst TMT remains the cornerstone of demand in the South East, the rapid growth in activity among flexible office providers has been the most striking trend in the market and indicative of clear structural shifts in occupier demand and a race for market share among operators. Rising from a nearly zero just three years ago, take-up from serviced office providers amounted to over 500,000 sq ft over the past 12 months.

Lease events were the primary trigger of recent office relocations in the Thames Valley, accounting for 44% of transactions. This was closely followed by expansions, with 39%. Workspace improvement also
played a significant role, being the key driver in a significant proportion of deals. These included several deals in which companies upgraded to newflagship offices. For example, KPMG recently agreed a 45,478 sq ft deal that will see it relocate its Reading office to the newly-built 2 Forbury Place in Reading.

Inward investment deals – those involving occupiers locating to new markets in which they were not previously present – represented 20% of recent transactions over 5,000 sq ft. Reading was by far the biggest attractor of inward investment, which accounted for 334,559 sq ft of occupier transactions last year. This was more than half of the town’s total take-up and it represented 42% of inward investment across the whole of the SouthEast. The largest deal in Reading saw Virgin Media take 120,000 sq ft for a new UKheadquarters at Green Park. Other major entrants to the Reading market included Sanofi, Ericsson and Fora.

Financial Sector and the London Office Market

The recent signing of a large pre-let of 123,000 sq ft of new London HQ offices by ICAP at 135 Bishopsgate, London, EC2 and large mid-size lettings to nearby to FIS Global and Peel Hunt, has underlined the contribution of the financial sector to London’s office market. Metropolis looks at the importance of the financial sector to office transactions and relocation moves in London.

In 2018, the financial sector made a huge 1.8m sq ft contribution to the 12m sq ft of office space let in central core area of London. Metropolis ran near 120 leads on financial sector firms finding medium or large premises during the year. There are thought to be over 3m sq ft of requirements in the London market, with Metropolis tracking 150 live requirements in London for 2019 and beyond, mainly driven by lease events, mergers and consolidation. Analysis of recent data suggests that financial sector office tenants are responsible for a quarter of London office deals so far in 2019.

JLL point to recent deals including 120,000 sq ft Grade A at 55 Gresham Street, EC2 let to Investec Asset Management. ICAP also taking acquiring 34,000 sq ft in Verde, SW1, consolidating from three West End offices, Sumitomo Mitsui Banking Corporation taking 161,000 sq ft pre-let at 100 Liverpool Street, EC2.

In the West End large recent Mayfair transactions include KKR pre-letting 57,000 sq ft at 18-19 Hanover Square, W1 and 21,000 sq ft over four floors to private equity firm Cerberus Capital Management at 5 Savile Row, W1. The King’s Cross Central development has attracted XTX Markets. There are up to 100 asset managers, private equity specialists and hedge fund managers in various stages of searches and potential requirements in the west end. Recent research suggests that London requirements will increase over the second quarter of 2019, with a number of prominent financial occupiers launching searches in advance of upcoming lease expiries.

Looking ahead, there are 300 London based media companies approaching lease expiries in the next two years. Future large identified requirements include: EBRD (Just signed in Canary Wharf), Bank of New York Mellon and The Northern Trust, together with expansion driven requirements from Brewin Dolphin and Smith & Williamson.

For further analysis and details contact Paul Ives at Metropolis

South East Office Market Rising

Recent Metropolis research into occupier moves in the South East, has revealed 250 relocations over the last 6 months and forms part of a pattern of rising level of market activity, that saw nearly 3.5m sq ft of office space let in the region in 2018.

Occupier confidence returned to the market with a number of high profile lettings being agreed including Sanofi’s 71,000 sq ft letting at Thames Valley Park in Reading, Starbucks acquired 54,000 sq ft at Building 7
Chiswick Park, and healthcare analytics company IQVIA leased 56,000 sq ft at No. 3 Forbury Place, Reading. However, the main volume of mover activity took place in the 5,000-20,000 sq ft bracket, accounting for 70% of transactions in 2018.

Take-up in the South-East office market of 3.5 million sq ft was the highest since 2007. Whilst deal numbers increased by 44% in the second half of 2018. CBRE say that over two thirds (69%) of office take-up occurred in H2. Whilst the overall number of deals increased, there was a surge in larger sized deals. There were 10 deals over 50,000 sq ft, accounting for 873,120 sq ft in 2018, all of which took place
in the second half.  Publicis took 211,000 sq ft at White City in west London and Virgin Media who took 121,000 sq ft at Green Park in Reading. The serviced office sector, which accounted for 10% of take-up in 2017, was increasingly active during 2018 with 19 new centres acquired. These sites totalled 512,000 sq ft and represented 15% of all take-up, with Spaces/Regus the most active operator.

Other large moves included KPMG, Chivas Brothers and McLaren Technology Group finding space.

Looking ahead, CBRE say that lease expiries in excess of 6 million sq ft in the next two years will be a key driver of take-up in 2019. As will a continuation of the recent merger activity. Future requirements could include Starling Bank, Allergan and telecom giant Three. Continued demand for new, high quality office space combined with a finite supply of available Grade A space and only a moderate pipeline of new stock coming through will result in competition for the best office stock, and a potential increase in pre-let activity.

London Office Market – January 2019

Central London office lettings in January 2019 reached just under 1m sq ft from 44 mid-large size office transactions (5,000 sq ft+) during the month. The January 2019 figure is in line with the current monthly London average of 1m sq ft.

January was characterised by 15 office deals over 20,000 sq ft, which were led by the WeWork’s 159,000 sq ft deal at Merchant Square, Paddington, W2, along with large deals to Alvarez & Marsal in London, EC2; Cinven’s large deal at 21 St James’s Square, SW1; plus Foraspace and ETC Venues at Southwark Bridge Road and 133 Houndsditch, EC3 respectively.

Business services topped the table of lettings by sector, compiled by Metropolis, underpinned by the WeWork deal and several other serviced office lettings. This was followed by financial services led by lettings to Cinven and Gartner. Insurance, professional and media were also well represented.

Office deals ‘under offer’ in central London fell slightly to 3.3m 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 42pc of the office floorspace let in January 2019 at 400,000 sq ft. The West End saw 355,000 sq ft of take-up. Midtown contributed 74,000 sq ft of lettings and Docklands 50,000 sq ft. Current London office demand is calculated to be around 3.7m 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 a healthy 420,000 sq ft sq ft (45% of the monthly total), as transactions for new space maintained the recent strong showing. Availability is dominated by secondhand space in all London markets.

Metropolis research is currently monitoring 625 ‘live’ London office requirements, with pending deals for space of up to 1.5m sq ft due to sign in the next few months.

Paul Ives Metropolis paul@metroinfo.co.uk