Rise of the pre-let

Recent research by Metropolis revealed that a total of 133 occupiers were involved in pre-let searches or deals during 2018. These included a wide variety of moves across the whole of the UK. In London, a record breaking 39 pre-let deals were signed during 2018 totalling 3.8m sq ft, ahead of the previously record-breaking 2.74 million sq ft of pre-lets agreed in 2013.

Reasons given by occupiers for the risingof pre-lets are varied, but include upcoming lease events, continued limited new developments coming on the market and faith in London. It is clear that tech and media firms are making significant long-term commitments to new buildings, alongside traditional City occupiers, including those in the insurance and financial sectors. 2018 was the year that global brands made big commitments, including the likes of real estate-savvy Facebook and Sony both committing to new European headquarters in the West End and King’s Cross.

Metropolis has identified up to 50 named occupiers, which have on-going London searches, which could sign pre-lets on under construction, new or newly refurbished office space in 2019.

Recent research by Cushman & Wakefield indicated that over the last ten years there has been a total of 24.4 million sq ft of office space let pre-let transactions completed. On average, there were 27
pre-lets each year over this period, with the peak being 2013 and 2014. Pre-letting is more common in the City, Docklands and City fringe, than in the West End.

Large pre-lets from TMT (tech, media and telecom) companies in recent years including Apple’s acquisition at Battersea Power Station (475,000 sq ft), Dentsu Aegis Network’s 312,000 sq ft deal at 1 Triton Square, Linkedin in Farringdon and Facebook’s recent commitment at King’s Cross (600,000 sq ft). Banking & financial occupiers were the next most active sector, accounting for 31% of total pre-let volumes over the last ten years, including Deutsche Bank’s future relocation into 21 Moorfields (469,000 sq ft), SMBC’s acquisition at 100 Liverpool Street (161,000 sq ft), Wells Fargo and TP ICAP’s pre-let of part of 135 Bishopsgate (122,000 sq ft).

Public sector and government occupiers have also driven pre-let volumes, including large-scale consolidations from HMRC, FCA and TfL, as well as the Chinese Embassy’s transaction at Royal Mint Court.

King’s Cross is one of the most popular desinations for new office stock secure pre-let in recent years, including deals in 2018 to Nike (63,000 sq ft), Facebook, Google, Spaces and WeWork. West End submarkets such as White City, Battersea and Nine Elms have have also attracted significant pre-lets including in 2018, Penguin Random House (83,000 sq ft).

It is clear that occupiers are looking beyond the traditional core office markets. Banking & financial occupiers took the largest share of tower pre-lets over the last 10 years with 32% of total volumes, matched by insurance companies (32%). Some 17% of lettings were prelet prior to construction and 29% let during the construction process, compared to 54% let post completion.

Outside of London, Barclays pre-let 470,000 sq ft at Buchanan Wharf in Glasgow. The new campus complex will house existing Glasgow staff along with new positions created in technology and operations functions. in Manchester, Booking.com has pre-let 222,000 sq ft at St John’s Building, as the new global headquarters for its ground transportation division, consolidating four offices around the city.

Research has revealed that larger occupiers are considering their options 3-4 years ahead of a move, especially if the target is a move in the core districts. Trends also include some smaller pre-lets with shorter leases, particularly whilst schemes are under construction. Competition for core space is making fringe locations more desirable, especially with the possibility of rental savings.

Metropolis is currently tracking over 100 occupiers looking for over 20,000 sq ft of offices in 2019-20, more than half of which could consider a pre-let.

Paul Ives Metropolis Head of Research – paul@metroinfo.co.uk

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London Skyline Report 2017

Metropolis and Cityoffices have published their Winter 2017 survey of the London office market for clients and those due to take subscriptions in December 2017 and January 2018.

The new report covers:

  • Commentary on the 92 London office schemes under construction at the beginning of Q4 2017;
  • The report examines the 32 new London scheme starts between Q1 and Q3 2017, as well as schemes completed over the course of 2017;
  • The analysis looks at the next wave of schemes due to start construction over the next few months, with examples;
  • A section on occupier demand looks at space pre-let in under construction and recently completed schemes;
  • Further sections examine London office lease ends in 2016 and trace the destinations of those occupiers in 2017;
  • The report concludes looking ahead of 2018, in terms both of those 6m sq ft of schemes currently at demolition stage and those tipped to see construction starts over the next 12 months.

The closing sections of the report also cover forecasts of likely office completion levels in 2018-2020 and current levels of office demand amongst London occupiers, set against trends in the letting of grade A office space in central London.

All figures are based on Metropolis and Cityoffices’ huge weekly business leads bulletins and website which delivers 130+ weekly interviews with office occupiers considering relocations, fit-out news and office scheme developers.

If you would like to find out more about a trial subscription in December or January 2018 to Metropolis and claim a free Skyline report, then email Simon at simon@metroinfo.co.uk

 

Skyline Report Summer 2017

Metropolis and Cityoffices are about to publish their bi-annual survey of office construction in central London.

 

  • The survey brings readers all the statistics on the 101 office schemes in central London currently under construction and tenant activity connected to those schemes, right up to date to June 2017.

 

  • The survey, compiled after many hours of street surveys, telephone research and crosschecking, takes a snapshot of the central London office construction in Q2 2017, recent completions, recent pre-letting activity and looks ahead to future pipeline projects that will shape the next three years.

 

  • The report looks at the volume of construction underway, lists the major new scheme starts and looks at the proportion of refurbishment space compared to new builds. The report breaks down office construction by London district: City, West End, Midtown etc, as well as major recent building completions.

 

  • The survey also looks at occupier demand, with recent trends in pre-letting including examples of recent deals and a comparison with each of the last ten years.

 

  • The report then turns to the future pipeline including the 29 schemes currently at site preparation stage and 200 schemes with planning consent awaiting a start date.

 

  • Finally, it concludes with some forecasts for London office development based on current trends and makes predictions for London occupier demand over the rest of 2017 based on Metropolis’ detailed London office tenant research.

 

The report will be available free of charge to Metropolis and Cityoffices subscribers. If you are interested in a subscription contact Andy King at andy@metroinfo.co.uk