Metropolis London Skyline Report

The London Wrecking (Christmas) Ball

or “What Comes Down Must Go Up”

abridged

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Metropolis and Cityoffices have completed their bi-annual ‘Skyline’ survey of the central London office development market for the period April 2015 to October 2015. The survey takes a snapshot of the central London office construction in Q4 2015, recent completions, recent pre-letting activity and looks ahead to future pipeline projects that will shape the next three years.

There are now 78 office schemes under construction in central London (compared to 74 six months ago) totaling an increased 11.1m sq ft (9.5m sq ft in April 2015). In the last six months there have been 31 new scheme starts, totaling 3.4m sq ft, including major new-builds such as the 866,000 sq ft 100 Bishopsgate in EC3, the 400,000 sq ft 10 Fenchurch Place in the City of London and the 228,000 sq ft 33 King William Street (33 Central) in EC4.

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The City dominates construction with 6m sq ft of new office space in schemes now underway (up from 4m sq ft in early 2015). There is now 500,000 sq ft of office space under construction at Kings Cross, with more at site clearance stage. The West End, including Paddington, has 2.7m sq ft under construction and a further 600,000 sq ft of office build is on-site in Midtown, but Southbank and Docklands still lag behind the rest of London.

The big story is the forthcoming space at demolition stage, with over 7m sq ft lined up to start in early 2016 and more to follow later in the year. In reality, further schemes currently at planning stage will add to these numbers, particularly the 2017 and 2018 totals. Therefore we expect development completions in 2017 and 2018 could reach 7-8m sq ft.

Looking ahead, some 33 future schemes are currently at site preparation stage with 7.2m sq ft of additional office space due to go under construction in the next 6 months. Many of these schemes will not be completed until 2017 or 2018, however it is clear there is a strong development pipeline.

 

The full Skyline report is currently available to Metropolis clients. Further details on the Metropolis service can be found at http://www.metroinfo.co.uk.

Copyright Metropolis Property Research Ltd 2015

 

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London West End Autumn 2015 – A Preview

Significant Demand In The Pipeline

This Metropolis blog breaks new ground with an attempt to give clients an insight into the ‘work in progress’ on forthcoming office requirements in the London West End market. In the spirit of those TV autumn trailers, we set out below a flavour of some of the stories we hope to bring Metropolis clients over the next two months.

Some Background

Outstanding, unsatisfied, named office requirements in central London are now estimated by Metropolis to be over 10m sq ft, which is the highest figure since the recession. This can only be an approximate figure as ‘requirements’ cover all types of searches from urgent ones involving tenants in buildings where the lease expires ahead of demolition to half-hearted searches by occupiers who are 90% sure that they will renew the lease, but want to compare the market in order to put some pressure on the existing landlord.

Many of the larger requirements (over 20,000 sq ft) are in advance of lease expiries in 2017-19. However, smaller searches below 10,000 sq ft, are often launched less than 18 months before lease expiry. In many cases the occupier is only looking because it needs more space, has a lease end, or it is affected by redevelopment. The costs of relocation tend to limit the number of ‘sideways moves’ involving a company relocating from one building to another, whilst keeping its occupancy size the same.

Recent West End Activity

Office relocation  activity in London’s West End has been a little muted so far in 2015. Figures compiled by Metropolis show Central London take-up in the 8 months to August was 7.6m sq ft, of which only 2m sq ft was to office space in the West End. Some 140,000 sq ft has been pre-let, 450,000 sq ft is grade A newly completed space, with the remainder secondhand.

Some of the larger deals have included Marshall Wace Asset Management’s 43,000 sq ft pre-let of 131 Sloane Street in Knightsbridge; Richemont’s 38,000 sq ft deal at Walmer House on Regents Street and just last month King.com’s letting of 65,000 sq ft at the recently-completed Ampersand Building on Oxford Street. Facebook is also set to confirm its 217,000 sq ft pre-letting of the under construction Rathbone Square in London, W1, which will be the largest West End letting this year.

What’s Coming Up

We are currently researching a number of promising West End leads which look likely to result in 40 named requirements and potentially 1.6m sq ft of office deals.

The majority of office requirements are for a move in 2016 (29), with the remainder lining up moves for 2017 or 2018. Some 23 occupiers are citing expansion as the trigger for their move, while 16 have lease events and the remainder are consolidating fragmented buildings or downsizing.

In terms of the sector, as the graph below shows, it is the media sector which dominates, followed by IT/e-commerce and financial services, including hedge funds and asset managers. The business services sector also remains important with a steady stream of new requirements from serviced office operators.

 

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Around a quarter of companies are looking in the core areas of Mayfair and St James’s, with a further quarter searching in Victoria. A further 25% are searching Soho and north of Oxford Street up to Kings Cross and Euston with the remainder looking in fringe areas such as Camden or Hammersmith.

By size, around half of the 40 requirements are below 20,000 sq ft, with a third between 20,000 and 50,000 sq ft and the remaining five searches are over 100,000 sq ft.

In Conclusion

There is a healthy pipeline of new requirements being launched in London’s West End this autumn. As would be expected, media companies, hedge funds and asset managers are very active, but these have been joined by some of the large e-commerce and social network companies and business service providers to increase the competition for space. Metropolis is working to research the details of these requirements and will be publishing these online for clients shortly.

 

Copyright Metropolis Property Research Ltd 2015

Central London Office Lettings 2014

Sharddong

Best Year For Deals Since 2007

Metropolis has recently published its latest client newsletter, this month a special report on central London office lettings in 2014. Highlights include:

– Central London deals hit 12.8m sq ft, up 5% on 2013 take-up
– 14 deals were over 100,000 sq ft
– Metropolis is tracking over 700 central London office requirements
– Just over 2m sq ft currently under offer

The newsletter was provided exclusively to Metropolis clients. If you are interested in finding out how Metropolis could help your company win new business please visit us at http://www.metroinfo.co.uk.

Top Ten London Business Sectors

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For the sixth year running, Banking and finance leads dominate the London business sector top ten. The largest search for space emerging from this sector in 2014 was a 300,000 sq ft requirement for HQ offices in London EC3, closely followed by a 200,000 sq ft office requirement in London EC2 and a similar sized requirement from a bank looking in EC4. Total new office demand in London from this sector was 4m sq ft.

Office demand from hedge funds amounted to just under 250,000 sq ft, with the average requirement a search for about 10,000 sq ft and the most popular postcodes London W1, SW1 and WC2. Demand from financial investment firms was 800,000 sq ft, with the most popular postcodes London EC2, EC3 and EC4.

Newly identified office demand from the media sector in London was about 2.5m sq ft. The largest search was a 300,000 sq ft requirement for HQ space in London W6. Other significant searches focused on London EC1 and SE1. The technology and telecoms sector, often grouped with Media under the banner “TMT”, had a similar preference for space in these postcodes, with space in WC1 and N1 also of considerable interest. Technology and telecoms demand for London offices was just over 1.5m sq ft.

 

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London office demand from the law sector remains strong, with 2m sq ft of new requirements identified last year. London EC2 and EC4 remain the most popular postcodes for this sector, although a significant number of 30,000 sq ft searches centered on London WC1 and WC2. There were over 40 confirmed law firm lettings last year, with 50% of firms yet to move.

New insurance sector office demand centered on London EC3, with 700,000 sq ft of space required in this postcode last year, matching 2013 demand. Another 300,000 sq ft was required by this sector, mainly in EC2.

In central London, Metropolis identified just over 14m sq ft of new requirements for offices. The top 5 most sought after postcodes areas by demand were: EC2 (3m sq ft), EC3 (2m sq ft), EC4 (1.6m sq ft), E14 (1.5m sq ft) and W1 (1.4m sq ft).

 

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There is currently a healthy level of competition for good quality completed and pipeline space in central London. We expect 2015 to be another good year for London fit-out, as companies continue to occupy space pre-let in previous years.

According to our research office take up in 2014 reached 12.7m sq ft, up 5% on the 2013 total. Take up in 2015 is also likely to be strong, but may not grow again by quite the same margin. Metropolis is currently tracking just over 12m sq ft of live office requirements in London and is picking up moves, on average, over 18 months before a deal is signed.

Copyright Metropolis Property Research Ltd, January 2015

 

Metropolis 2014 Lead Research Review

1,000 new office requirements

The Metropolis research team produced a total of 6,154 relocation, construction and refurbishment leads in 2014. Over 26% of these were active UK office space requirements, in line with 2013 and 2012 research results. 1,613 office requirements were confirmed in total, with 1,000 new office requirements uncovered by our research. New office requirements accounted for 22.5m sq ft of UK office demand.

60% of Metropolis leads were projects located in the South of the UK (61% in 2013, 63% in 2012, 61% in 2011, 2010 and 62% in 2009), with 40% of lead projects located in Wales, the Midlands, North, Scotland and Northern Ireland. Greater London projects represented 48% of the 2014 lead total, 3% above the 2013 proportion.

 

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In Greater London, Metropolis identified just over 18m sq ft of new requirements for offices, with over 800 companies looking for new space. Just over 14m sq ft of this demand was for central London space. The top 5 most sought after postcodes areas by demand were: EC2 (3m sq ft), EC3 (2m sq ft), EC4 (1.6m sq ft), E14 (1.5m sq ft) and W1 (1.4m sq ft).

Office relocation and refurbishment activity continues to be strong in the North West of the UK. Metropolis identified 1.2m sq ft of new office demand in the region, 61% of which was demand for Manchester space. The largest requirements emerged from banking and IT companies.

In the South East (excluding London), the largest office relocation and refurbishment projects were located in Buckinghamshire and Oxfordshire. Demand for new office space in the South East reached 2.4m sq ft and 39% of this demand was for offices in Berkshire.

Leads numbers in Scotland were 28% down on 2013’s record result (120% up on 2012), however the region is still the UK’s 4th most active according to our research. Metropolis identified 800,000 sq ft of new office demand in Scotland as a whole in 2014, 50% of which was centered on Edinburgh.

In Yorkshire and Humberside, just under 700,000 sq ft of new office requirements were identified, with 71 companies looking for new space. Demand for new space in Leeds accounted for just over 500,000 sq ft.

West Midlands lead numbers were largely on par with results over the past three years. Just under 0.5m sq ft of new demand was identified in Birmingham.

In the South West, just under 700,000 sq ft of new office demand was identified. Bristol was the preferred location for large government, education, energy and insurance company moves. Office take-up in Bristol last year reached 1.2m sq ft.

Lead numbers in the North jumped by 22%, the highest number of relocation, refurbishment, and construction projects recorded in that region since 2011. 23% of office demand in the region centered on Newcastle-upon-Tyne.

 

 

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UK Lead Projects by Size

55% of Metropolis leads in 2014 reported on projects over 10,000 sq ft. 46% of leads were made up of projects between 5,000 sq ft and 30,000 sq ft. 74% of leads covered projects over 5,000 sq ft. The increase in lead projects between 1 and 2,000 sq ft was influenced by a significant number of central London office, residential and hotel redevelopment schemes unseating existing tenants.

 

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Top 10 Business Sectors – UK Relocation and Refurbishment Projects

The Banking & Finance Sector leapt ahead of Technology & Telecoms in 2014 and was the strongest UK business sector in terms of relocation and refurbishment projects. Lead numbers within this sector grew by 7% when compared to 2013, the strongest showing in the last five years. The largest requirements in this sector were unsurprisingly targeted at London space. Four of the top five office requirements were searches by Banks in the City of London. Banks & Financial service companies also had 50,000 sq ft + requirements for office space in Birmingham, Manchester, Southampton and Bristol.

 

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Newly identified demand for office space from Technology and Telecoms companies in the UK hit 2.1m sq ft last year. Requirements for space in London accounted for 50% of this figure. The largest searches for offices outside of London targeted Slough, Glasgow, Warrington, Manchester and Oxford. Office demand from media sector companies, often grouped with Technology and Telecoms under the banner “TMT”, reached 1.5m sq ft. London, particularly SW1 and WC2, was the overwhelmingly preferred location for this sector.

The top ten law firm office relocation projects by size were all located in central London, predominantly the City, particularly London EC4 and EC2. However there were two 70,000 sq ft + requirements for space from this sector in Leeds and a 100,000 sq ft requirement in Manchester.

The industry consensus is that London and the south east outpaced the rest of the UK in 2014 as they are further ahead in the cycle, but the predictions are that the regions will begin to pick up in 2015. This is likely to drive an increase in speculative developments and a rise in rents, which will in turn lead to more demand for offices in regional cities. In London, availability will fall again leading to more development and more relocations to fringe central London locations.

Copyright Metropolis Property Research Ltd, January 2015

 

Good year for Glasgow

A recent office market report on Glasgow by Knight Frank highlighted an excellent year for office lettings in the city. Office take-up for the year reached 700,000 sq ft, which was 30% above the ten-year average (see below).

 

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The largest deal was Scottish Power’s 220,000 sq ft pre-let St Vincent Street HQ, but there were also significant lettings to Brodies Solicitors taking 25,000 sq ft, Atos (37,000 sq ft), Ashurst Solictors (25,000 sq ft), JP Morgan (21,000 sq ft), SAS Software (20,000 sq ft), KPMG (15,000 sq ft), Speirs & Jeffrey (15,000 sq ft) and Skyscanner (11,000 sq ft).

The Metropolis database reveals just over 30 outstanding office requirements in Glasgow, including Teleperformance and Ministry of Justice looking for 30,000 sq ft each and Aquira looking for 20,000 sq ft each. The thirty firms are currently searching for a total of over 300,000 sq ft of office space in the city, although this includes a lot of sub-5,000 sq ft searches. There are another 35 firms due to make decisions ahead of lease expiries in 2014 and 2015.

Total availability of office space in Glasgow, both second-hand and newly constructed or refurbished, has fallen 400,000 sq ft, but only two new buildings fully available for letting.

Three Glasgow office schemes are under construction: Abstract Securities’ 170,000 sq ft St Vincent Plaza; Bam Properties’ 163,000 sq ft 110 Queen Street and M&G Real Estate’s 140,000 sq ft 1 West Regent Street. Agents expect over 450,000 sq ft of new office space to be completed in 2015 and a number of existing Glasgow occupiers are expected to negotiate pre-lets.

The outlook is that a number of high profile office letting deals are likely to be signed over the next 12-18 months as the new office space comes online. There are also additional sites in the pipeline awaiting pre-let interest. Glasgow is also likely to feel some gain to its profile from the 2014 Commonwealth Games which could help inward investment.

ISG wins £32m refurb

Retailer Arcadia has appointed ISG as main contractor and started a £32m refurbishment of its UK headquarters at Colegrave House, 70 Berners Street, London, W1. The phased fit-out of five floors of its existing office space, covers 14,400 sq m (155,000 sq ft) includes a new reception area on the ground floor. The project will be carried out in phases to allow staff to remain in the building for the duration of the project and is scheduled for completion in summer 2015.