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.

 

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Technology Companies and Offices

CBRE has recently published its ‘Tech Cities’ report looking at  office leasing patterns in the technology sector across Europe.

Conclusions include:

Technology companies still dominate tech activity across Europe in real estate terms – 65% of all deals tracked fall under software, IT services, telecom or hardware;

The e-commerce sub-sector accounts for the largest average deal size of leasing transactions, which reflects the aggressive growth of the sector across industries. Berlin for instance has attracted larger
e-commerce floorplates than anywhere else in Europe along with London, Dublin and Amsterdam;

While new tech companies make up a smaller proportion of total deals than traditional sub-sectors, they are just as space-hungry as the more traditional companies in terms of average deal size. This reflects differences in growth speeds of companies within each of these two categories in the global marketplace, with the new tech sector seeing particularly rapid growth;

Depending on the tech sub-sector and business strategy, occupiers will be able to agglomerate with peers within the same sub-sector, or identify a different sub-sector that offer benefits of a close location, with London, Reading, Bristol and Cambridge as examples;

London is CBRE’s top-ranking technology cluster. The city is a magnet for young technology talent, and employment in the tech sector has grown by 20% since 2008. Major employers in the IT services sub-sector include Capgemini & Cognizant; the largest employers in the software sub-sector include Microsoft and Oracle and in telecoms the city is home to major operations for BT & Vodafone. Other top employers of tech talent in London include Accenture, IBM, and Thomson Reuters;

The Thames Valley region is one of the most established technology clusters in Europe. The Thames Valley is dominated by very large organisations which make up more than 62% of employment. Telecoms, IT services and software are the dominant sub-sectors in the cluster with major employers being largely global tech companies including Vodafone, Huawei, Telefonica, Microsoft, Oracle and Hewlett Packard. Oracle, Cisco and Microsoft are major employers of development talent in the Thames Valley region with Visa and Sky also having large operations in the cluster;

Bristol is one of the major regional centres for tech outside of London and the Thames Valley with employment in the sector growing by 25% since 2008. Bristol is a major centre for the telecoms industry with EE, BT, Nokia, Orange and Vodafone all having a presence in the city. Other major employers of tech talent include Lloyds Banking, IBM and Hewlett Packard. Bristol is also home to IT service companies Softcat plc and Civica.

CBRE say that understanding underlying demand conditions using this framework helps inform potential future office transaction strategies.

Metropolis is currently tracking around 150 IT, technology and telecom companies searching for offices across the UK.

 

Metropolis Leads in July 2018

Metropolis ran 592 business leads on ‘office movers’ in July 2018. If all reported moves were added together the total would exceed 16 million sq ft of office searches and transactions, researched by Metropolis’ unique market-led intelligence research team, last month.

London was the largest region with 270 business leads during month, but there were also strong showings from the South East (71),  Scotland (69) North West (38) and Yorkshire (36). Financial services and business services were the largest business sectors planning relocations or agreeing moves during the month.

The relocation leads geographically covered the whole UK and provided details of the size of the office occupier, company 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 592 July leads, included those on occupiers Facebook, Linklaters, Barclays, EBRD and Diageo.

The July 2018 leads included 172 ‘identified requirements’, including 90 in London. Which means that the company confirmed to researchers that it has current or future plans to search for alternative office space. Of these 172 searches, 105 were newly posted office searches, not previously notified to clients.

The most recent research also included 142 ‘potential movers,’ which were mainly longer-term leads on occupiers, considering a relocation, but the occupier has yet to make a final decision on whether to search.

Most of the remaining stories covered companies that have just 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 2021.

Recent research by Metropolis concluded that a conservative estimate of ‘live’ business tender opportunities on the database in recent months, exceeded £1bn of business.

If you would like some information on flexible Metropolis subscription packages, then please email Andy at andy@metroinfo.co.uk, mentioning ‘Metropolis Blog’

Metropolis Office Mover Leads in June 2018

Metropolis ran 562 business leads on ‘office movers’ in June 2018. If all reported moves were added together the total would exceed 14 million sq ft of office searches and transactions, researched by Metropolis’ unique market-led intelligence research team, last month.

London was the largest region with 240 business leads during month, but there were also strong showings from the South East (60),  Scotland (51) North West (43) and Yorkshire (35) . Business services and financials services were the largest business sectors planning relocations or agreeing moves during the month.

The relocation leads covered the whole UK and provided details of the size of the office occupier, company 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 562 June leads, included those on occupiers Amazon, British Airways, Barclays, Scottish Office and WeWork.

The June 2018 leads included 171 ‘identified requirements’, including 84 in London. Which means that the company confirmed to researchers that it has current or future plans to search for alternative office space. Of these 171 searches, 100 were newly posted office searches, not previously notified to clients.

The most recent research also included 160 ‘potential movers’ which were mainly longer-term leads on occupiers, considering a relocation, but the occupier has yet to make a final decision on whether to search.

Most of the remaining stories covered companies that have just 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.

Recent research by Metropolis concluded that a conservative estimate of ‘live’ business tender opportunities on the database in recent months, exceeded £1bn of business.

If you would like some information on flexible Metropolis subscription packages, then please email Andy at andy@metroinfo.co.uk, mentioning ‘Metropolis Blog’

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

Metropolis Christmas Quiz

Just a bit of fun – answers later in the week

 

1. What was the biggest letting in London in 2017?

a) Deutsche Bank, b) Dentsu Aegis, c) Apple

 

2. How many NEW office searches/requirements have Metropolis published in 2017?

a) 1300, b) 1400, c) 1500

 

3) How much office space is under construction in central London according to the winter 2017 Metropolis Skyline report?

a) 14.6m sq ft, b) 13.6m sq ft, c) 12.6m sq ft

 

4) What % of Metropolis leads have an email address attached?
a) 75%, b) 70%, c) 65%

 

5) Vedanta is paying a record West End rent in Berkeley Square, Mayfair W1 of

a) £125 psf, b) £130 psf c) £135 psf

 

6) How many occupiers have Metropolis reported to be ‘under offer’ on office space in 2017?

a) 85, b) 90, c) 95

 

7) The largest office letting in Manchester in 2017 was ?

a) Kelloggs, b) WeWork c) Clyde & Co

 

8) How many pre-lets has Metropolis reported on in 2017?
a) 160, b) 170, c) 180

 

9) Which contractor topped the table of fit-out contractors in the 2017 Metropolis Fit-out report?

a) Overbury b) Como c) ISG

 

10) Metropolis has reported on London office lettings from January to November 2017 of

a) 9m sq ft, b) 10m sq ft, c) 11m sq ft

Aberdeen, Edinburgh and Glasgow Offices

A recent report from Savills on the Scottish office market, saw lettings reach 1.4m sq ft for the first half of 2017, 20% above the five year half year average.

Savills say that the Aberdeen office market has seen increased letting activity in recent months driven by the increased oil price. Take up during the first half of 2017 reached 238,000 sq ft, exceeding the 2016 full year level. 78% of take up was accounted for by the engineering, oil and utilities sector, up from 17% last year.  Nonetheless there remains ample supply of office space in the Aberdeen market, which has fallen just 3% from end 2016 to stand at 2 million sq ft. Office schemes at the Silver Fin building and Marischal Square are both expected to complete during the second half of 2017, providing 287,000 sq ft of additional speculative offices.

Edinburgh saw the strongest quarter of take up on record during the second quarter of 2017, according to Savills, pushing the half year total to 772,000 sq ft, which was 50% above the five year first half average.
Total city centre take up at half year reached 541,000 sq ft. This was largely driven by the GPU (Government Property Unit) signing a pre-let on 180,000 sq ft of space at New Waverley. Other large scale deals included Computershare signing a pre-let for 41,000 sq ft of space to be refurbished in Four North and Burness Paull regearing on 27,000 sq ft at 50 Lothian Road. Other deals in the out of town market included Standard Life signing for 31,000 sq ft at South Gyle Broadway. Grade A available office space remains scarce in Edinburgh, with only 313,000 sq ft of space remaining,

Glasgow saw office lettings reach 434,000 sq ft across the city centre and out of town markets during the first half of 2017, in line with the five year first half average. The largest deal was the Student Loans Company’s 41,000 sq ft letting of Europa House. Despite modest take up figures for the city centre market, the out of town market saw a number of engineering companies take space, which has accounted for 25% of the wider market take up this year.With a number of large deals under offer in the city centre, such as DWP, take up in Glasgow looks set to reach Savills forecast of 600,000 sq ft for the full year.

Metropolis has published 60 business leads on Aberdeen, Edinburgh and Glasgow occupiers with requirements, looking for office space over the last six months. It is also reporting on nearly 100 office tenants that are ‘potential movers’ as they approach decisions on whether to renew leases or relocate in 2018 and 2019.