Scottish Offices 2018

Lambert Smith Hampton, the property adviser, has just published its review of the Scottish office market in 2017 and makes its predictions for 2018.

LSH say that for half of office movers in Glasgow, Edinburgh and Aberdeen (57% of occupiers), relocation was more likely to be prompted by a lease expiry or break option, a pattern that underlines the importance of market churn over inward moves from companies based outside Scotland.

Notable transactions triggered by lease events included State Street Bank and Trust Company (65,628 sq ft at Lauriston Place, Edinburgh), the Scottish Prison Service (51,009 sq ft at
Redheughs Rigg, Edinburgh) and Balfour Beatty (43,568 sq ft at Maxim 7, Glasgow).

Expansion was the trigger for 26% of relocations, indicating ongoing confidence among occupiers. Expansion also played a part in a number of deals in Aberdeen despite the dip in oil prices, albeit none of these involved occupiers in the energy sector. Key deals spurred by expansion included the University of West Scotland (225,000 sq ft), Computershare (41,395 sq ft) and the Student Loans Company (40,853 sq ft). Common among these occupiers was a desire for better quality office space or a more effective working environment.

In Edinburgh, location was behind the vast majority of relocation choices. In Glasgow, location accounted for less than half of deals. In some instances, occupiers were able to expand at the current base. For
example, Wescot Credit Services acquired an additional 10,567 sq ft at 38 Cadogan Street, Glasgow while Actavo acquired a further 10,685 sq ft at Alexandra Parade, Citypark, Glasgow.

Better quality office space was cited as the key driver of choice in 14% of deals, a notable example being Mott MacDonald’s acquisition of 34,515 sq ft of grade A space at St Vincent Plaza in Glasgow. Improved efficiency was the key driver of choice for 12% of deals, the largest being ST Microelectronics acquisition of 21,530 sq ft of grade A space at Tanfield, Edinburgh.

Looking ahead, to the end of 2020, Scotland’s five largest town’s and cities possess almost 450 known lease events in excess of 5,000 sq ft. 2018 will see 145 lease expiries and breaks above 5,000 sq ft across the
key markets, amounting to just over 2.1m sq ft of potential demand.

Metropolis is currently monitoring over 50 Scottish companies with plans to move in 2018 and over 100 occupiers coming up to decisions on leases in Aberdeen, Glasgow and Edinburgh.

Advertisements

London Office Market Analysis

Estates Gazette has just published in analysis of the London office market in 2017. The main conclusions include:

 

  • Total central London office take up was 12.6m sq ft (all deals) which was up around 2m sq ft on the 2016 total in a relatively strong year and just above the five year average;

 

  • The City core saw just under 3.6m sq ft of deals in 2017, together with 1.8m sq ft in the City fringe. Both figures are down on previous years;

 

  • Lettings in the Midtown, West End and Southbank areas were strongly up by over 40% last year;

 

  • Lettings of Grade A space were up strongly at 52% of all lettings in 2017, compared to 42% in 2016;

 

  • Overall, TMT was the most active sector in 2017 as a whole, accounting for more than 27% of all lettings. The five biggest deals in the quarter were from the TMT, Central and Local Government, Property, and Financial sectors. A proportion of small and medium sized occupiers are being absorbed by serviced office space;

 

  • Some 3.7m sq ft of new office space was started in 2017, but this compares with an average of over 5m sq ft of starts in 2015 and 2016. This means there are lots of speculative completions coming through, which in turn in driving higher take-up;

 

  • Around 8.3m sq ft of new London office completions are planned for 2018 (a ten year high), with over 6.3m sq ft of completions already planned for 2019;

 

  • Overall London office availability has risen from 4.3% in 2015 to 7.4% in late 2017, driven by a rise in secondhand space that now stands at 12.4m sq ft;

 

  • As a result rents overall are edging down, which could encourage more occupiers to relocate;

 

  • 2018 take-up in central London is likely to be driven by new build deals;

 

Metropolis forecasts that the rising volume and proportion of new build letting transactions will sustain the fit-out and office equipment supply markets in 2018-19.

Cityoffices.net forecasts a strong pipeline of new schemes (there are over 200 in the pipeline of 20,000 sq ft or more) seeing construction starts in 2018.

Central London office lettings in December and 2017 Summary

Central London office lettings in December 2017 reached a healthy 1.1m sq ft of deals from 40 mid-large size transactions (5,000 sq ft+) during the month. The December figure slightly outperforms the current monthly average of 1m sq ft . Annual London take-up reached 12.2m sq ft, just above the 2016 figure.

December was characterised by 13 office deals over 20,000 sq ft, which included Turner Broadcasting’s 100,000 sq ft letting at 160 Old Street, EC1; Penguin’s 83,000 sq ft letting at Embassy Gardens, SW8; Vitol took 48,000 sq ft at Nova, SW1 and Enstar took 32,000 sq ft at Creechurch Place, EC3.

Media topped the table of lettings by sector, underpinned by Turner and Penguin deals. This was followed by IT services with the large deals involving Google and Dell.  Insurance and business services also performed well, helped by the lettings to Enstar and XBridge. Office deals ‘under offer’ in central London fell slightly to 3m sq ft but pending deal volumes are healthy in nearly all sub-markets.

By area, the City accounted for 39pc of the office floorspace let in December at 419,000 sq ft. The West End saw 184,000 sq ft of take-up, underpinned by Vitol. Midtown contributed 236,000 sq ft of lettings, plus 90,000 sq ft of Docklands deals. Current London office demand is calculated to be around 3m sq ft in the City and 2.7m sq ft in the West End.

The volume of grade A (newly built or refurbished office space) let during the month reached 558,000 sq ft (52% of the monthly total), as transactions for new space resumed their recent strong showing.

Metropolis research is currently monitoring 640 ‘live’ London requirements, with deals for space of up to 1.8m sq ft due to sign in the next few months.

Cityoffices is shortly to publish its annual review of the planning pipeline in London. Further details of planning applications and consents, with scheme by scheme detail are listed on the Cityoffices.net website. Details on the report and the Cityoffices database from Andy King at andy@metroinfo.co.uk

2017 Review

The 12.2m sq ft of central London take-up recorded in 2017 (deals 5,000 sq ft and above) was slightly above the 11.9m sq ft recorded in 2016.

The largest deals were lettings to Deutsche Bank, Dentsu Aegis, then 3 lettings to WeWork

The serviced office sector took nearly 2m sq ft of offices in 2017. WeWork let over 1.24m sq ft (10%) of the total 2017 take-up

As well as Business services, Financial services took 1.9m sq ft, IT sector took 1.5m sq ft, Media took 1.2m sq ft and Professional 1.1m sq ft

The City accounted for 5.1m sq ft, Midtown 2.4m sq ft, West End was 3.1m sq ft

Opportunities in Serviced Offices

Colliers International has published a new report on the serviced or flexible workspace sector. Colliers outline how the workplace solutions providers have been hoovering up office space in London at a faster rate than any other sector apart from tech and media.

Flexible office providers have accounted for 18% of take-up across London during 2017 date. Central London is now home to over 7.8 million sq ft of flexible workspace from 4.5 million sq ft in 2009. This is a rise of 73% in eight years, although flexible workspace space currently only represents 4% of total London office stock.

2017 is set to deliver up to 15,000 desks by year end. Serviced office lettings appeared to have peaked at 1.4 million sq ft in 2015, however, 2017 is set to see that figure eclipsed with 1.2 million already let and a further 750,000 sq ft under offer.

WeWork has taken over 1.25 million sq ft of office space within the past 12 months. Blackstone and British Land have both begun in-house flexibile solution without leasing space to major providers like WeWork or Regus.

Paddington and City fringe, have seen increasing vacancy rates below 5,000 sq ft, and Victoria and parts of Midtown have seen void periods double in 2017. The City core has held up, but also seen activity from providers such as WeWork, Prospect Business Centres, i2, Regus and LEO.

Metropolis has researched nearly 20 specific requirements for medium/large London serviced offices in recent months. These new searches come on top of 25 recent transactions for space. Opportunities exist for agents recruiting occupiers for the large new flexible work centres, for fit-out contractors refurbishing usually previously vacant space, for furniture providers and removal firms handling the myriad moves to the new buildings.

Colliers say the need for short leases and flexible space, particularly since the Brexit vote, is driving demand for increasing volumes of flexible workspace space. Although, flexible workspace only represents 4% of London office stock, it looks set to become an important slice of the market, not just in London, but increasingly in regional cities too.

Central London Lettings – August 2017

Central London office lettings in August 2017 reached an exceptional 1.57m sq ft of deals from 58 mid-large size transactions (5,000 sq ft+) during the month. The August figure exceeds the current monthly average of just under 1m sq ft .

August was characterised by 13 office deals over 20,000 sq ft, which included Deutsche Bank’s 470,000 sq ft pre-let at 21 Moorfields, EC2: WeWork’s two pre-lets at The Stage, EC2 and the nearby ‘Shoreditch Exchange’; Kings College London took 73,000 sq ft at Roman Wall House, EC3, and Atos took 42,000 sq ft at Mid City Place, WC1.

Financial services topped the table of lettings by sector, underpinned by the Deutsche Bank deal. This was followed by business services with large deals involvingWeWork. IT services also performed well, helped by the lettings to OpenText and Kobalt. Office deals ‘under offer’ in central London held steady at 3.5m sq ft and pending deal volumes are healthy in nearly all sub-markets.

By area, the City accounted for 68pc of the office floorspace let in August at 1,066,000 sq ft. The West End saw 233,000 sq ft of take-up. Midtown contributed 145,000 sq ft of lettings. Current London office demand is calculated to be around 3.3m sq ft in the City and 2.9m sq ft in the West End.

The volume of grade A (newly built or refurbished office space) let during the month reached 1.2m sq ft (77% of the monthly total), as transactions for new space resumed their recent strong showing.

Metropolis research is currently monitoring 600 London requirements, with deals for space of up to 2.5m sq ft due to sign in the next few months.

Cityoffices and Metropolis are working on an autumn 2017 update to their twice yearly London Skyline report. The update will contain details of dozens of new office schemes under construction, planning applications and consents, with scheme by scheme detail on the Cityoffices.net website. Details on Cityoffices from Andy King at andy@metroinfo.co.uk

Future Office Demand in Cambridge

Savills has just published a report on the Cambridge market. It reveals that 262,000 sq ft of office and laboratory space was let in the first half of 2017. This includes major deals to Amazon, Heptares and Astex Pharmaceuticals.

Metropolis has recently reported on 30 major planned relocations in Cambridge, including PWC’s pre-let at Station Square, CIE’s huge relocation and a consolidation by Citrix. The Maurice Wilkes headquarters building has a further floor under offer.

In recent years, annual office and laboratory space take-up has reached 620,000 sq ft. Demand is being driven by inward investing and expanding global R&D businesses. With an additional 2,200 office- and laboratory-based jobs forecast over the next five years, some 300,000 sq ft of additional office space is required.

Cambridge’s ability to attract multinational office and lab occupiers in recent years has allowed it to compete with other global cities as a biosciences and pharmaceutical hub.

Recently, £40 million was invested in the cancer treatment firm Bicycle Therapeutics, at Babraham. Of the 10 largest biotech companies in Boston, USA, eight have a Cambridge UK presence.

Savills say that over the next three years, around two million sq ft of office and laboratory developments will be delivered in the Cambridge market. However, only 385,000 sq ft of this is speculative, with the majority lined up for local occupiers. The bulk of speculative space is scheduled to deliver during 2019.

Biomed Realty is developing 108,000 sq ft of speculative grow-on space at Babraham, set to complete during 2019, while more space is also planned at Granta Park. The Bradfield Centre, currently under construction in Cambridge Science Park, will provide 40,000 sq ft of space.

The outlook for the Cambridge office market appears to be continued expansion. Recent announcements and requirements tracked by Metropolis have included growth by the likes of AstraZeneca, Abcam, ARM, Open Cloud, Cambridge Epigenetix, Jellycat, Marshall Aerospace,  CyanConnode and Burall InfoSmart.

Office Relocations Planned in August

Metropolis ran 645 business leads on ‘office movers’ in the month of August 2017. 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 284 leads during month, but there were also strong showings from the South East (62), North West (62), Yorkshire (49) and Scotland (42). IT services, professional and financial 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, its 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 580 July leads, included those on Deutsche Bank, EBRD, Medicines and Healthcare Agency and TK Maxx.

The August 2017 leads included 214 ‘identified requirements’. Which means that the company confirmed to researchers that it has current or future plans to search for alternative office space. Of these 214 searches, 130 were new office searches, not previously notified to clients.

The most recent research also included 161 ‘potential movers’ which were mainly longer-term leads on occupiers, considering a relocation, but have yet to make a final decision on whether to search.

Most of the remaining stories covered companies that have 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.

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

—————————————————————————————————————————————————————————-

Cityoffices.net, the sister property leads service to Metropolis, saw a further 25 stories posted in August, covering new development opportunities planning applications, consents, construction starts and development teams in London and major cities. The database now covers over 200 office schemes in the pipeline for construction starts in 2017-2020.

For more information on Cityoffices, email Andy at andy@metroinfo.co.uk