Central London Office Market in February 2019

March 26, 2019 Leave a comment

Central London office lettings in February 2019 reached just over 950,000 sq ft from 50 mid-large size office transactions (5,000 sq ft+) during the month. The February 2019 figure is in line with the current monthly London average of 1m sq ft.

February was characterised by 11 office deals over 20,000 sq ft, which were led by Bank of Canada’s 250,000 sq ft pre-let at 100 Bishopsgate, EC2, along with large deals to House of Commons at Dartmouth House, SW1; Rothesay Life’s expansion at the Post Building, WC1; plus Challenge Partners at Elizabeth House, York Road in SE1 and TechHub at Fitzroy House, London, EC2.

Finance services topped the table of lettings by sector, compiled by Metropolis, underpinned by the Bank of Canada deal. This was followed by business services led by serviced office lettings. Insurance, professional and media were also well represented.

Office deals ‘under offer’ in central London rose to 3.4m 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 60% of the office floorspace let in February 2019 at 566,000 sq ft. The West End saw 171,000 sq ft of take-up. Midtown contributed 125,000 sq ft of lettings and Docklands 19,000 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 a healthy 569,000 sq ft sq ft (59% 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 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.

Paul Ives Metropolis paul@metroinfo.co.uk

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Metropolis Movers October 2018

November 30, 2018 Leave a comment

Metropolis ran 616 business leads on ‘office movers’ in October 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 300 business leads during month, but there were also strong showings from the North West (61), South East (52) and Yorkshire (52). Financial services, IT 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 616 October leads, included those on occupiers Shell UK, IBM, WPP,Jane Street Capital and McCann Worldgroup .

The October 2018 leads included 161 ‘identified requirements’, including 100 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 175 searches, 109 were newly posted office searches, not previously notified to clients.

The most recent research also included 176 ‘potential movers,’ which were mainly longer-term leads on occupiers, considering a future 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 or Paul at andy@metroinfo.co.uk or paul@metroinfo.co.uk, mentioning ‘Metropolis Blog’

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February 2018 Central London Lettings

April 6, 2018 Leave a comment

Central London office lettings in February 2018 reached just over 1m sq ft of deals from 50 mid-large size transactions (5,000 sq ft+) during the month. The February 2018 figure is in line with the current monthly average of 1m sq ft.

February was characterised by 11 office deals over 20,000 sq ft, which included Sumitomo’s 161,000 sq ft re-letting at 100 Liverpool Street, EC3; Sidley Austin’s 135,000 sq ft pre-letting at 70 St Mary Axe, EC3 and Prudential took 59,000 sq ft at Angel Court Tower, EC2.

Financial Services topped the table of lettings by sector, underpinned by Sumitomo and Prudential deals. This was followed by professional services mainly underpinned by the signing of the Sidley Austin pre-let. Office deals ‘under offer’ in central London stayed at 3.5m sq ft, but pending deal volumes are healthy in nearly all sub-markets, with over 30 deals pending.

By area, the City accounted for 50pc of the office floorspace let in February 2018 at 501,000 sq ft. The West End saw 266,000 sq ft of take-up. Midtown contributed 66,000 sq ft of lettings, plus 143,000 sq ft of Docklands deals. Current London office demand is calculated to be around 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 557,000 sq ft (55% of the monthly total), as transactions for new space resumed their recent strong showing. Availability is dominated by secondhand space in all London markets.

Metropolis research is currently monitoring 655 ‘live’ London requirements, with deals for space of up to 1.9m sq ft due to sign in the next few months.

Cityoffices is working on its current ‘Skyline Survey’ in London. Further details of office scheme 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

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New Lease Research from Metropolis

November 2, 2017 Leave a comment

The London office market has maintained steady office letting take-up during 2017. The latest figures calculated by Metropolis to the end of Q3 2017 reveal office transactions totaling 8.8m sq ft for the first nine months of the year (deals 5,000 sq ft and above). Based on these figures and a number of large office moves under offer, 12m sq ft take up by the end of the year is not out of the question. If 12m sq ft is achieved this would surpass the 11m sq ft of 2016 and match the total for 2015.

The table below breaks down take-up in London in 2017 by the five largest sectors

Sector                             % of take-up
Financial                          20%
Business Services           19%
IT/Computer                   15%
Professional                     12%
Media                                11%

Financial services leads the way, boosted by the large pre-let in the City to Deutsche Bank. Business services comes a close second helped by over 900,000 sq ft of lettings to serviced office operator WeWork. IT has been driven by large expansions by Expedia, Amazon and Spotify. By area, the City has taken around 40% of take-up, with West End, Midtown and Southbank broadly taking 15% each. Docklands has had  a very quiet 2017.

Metropolis has recorded 96 deals for London office space of 20,000 sq ft or more in so far 2017 amounting to 5m sq ft. Business services, underpinned by WeWork deals, takes over 1.2m sq ft of that, followed by 880,000 sq ft of financial sector driven by Deutsche Bank, 600,000 sq ft of IT industry deals and nearly 500,000 sq ft from professional companies (law firms, accountants, consultants). a further 2m sq ft of deals are ‘under offer’ and close to signing in Q4 2017.

Recently some office market analysts have advanced the view that the London office market for moves under 20,000 sq ft is ‘patchy’. So Metropolis went back to all the potential office occupiers contacted in 2016, approaching 2017 lease expiries, to trace what happened next.

Taking a sample from the 700 London-based occupiers contacted during 2016, Metropolis found that, despite the fact that many were simultaneously negotiating with the landlord of the existing office, over 70% of occupiers decided to move, prior to the upcoming lease expiry. The sector with the strongest propensity to move was media and the least likely to move was business services. The larger a company, the slightly higher propensity to move. West End companies were slightly more likely to move than City-based ones.

The last nine months has seen a strong pace of office space pre-lets set by incoming tenants in advance of construction completion. In total, some 4.3m sq ft of London office space, that is currently under construction, has been pre-let. Some of the high profile recent pre-lets included Boston Consulting, Metro Bank taking 67,000 sq ft of offices at 20 Old Bailey, EC4; Boston Consulting and Arup at 80 Charlotte Street, W1; HSBC taking 30,000 at Cork Street, W1 and Kings College at Roman Wall House, EC3.

The most common trigger for pre-let relocation is expansion. Nearly 50% of the space completed over the previous 6 months has now been let and includes big lettings to likes of Universal Music, Cancer Research, XTX Markets, British Council, Cleary Gottlieb, Schroders and Moneysupermarket.

Looking ahead, our research with thousands of London office tenants suggests a robust level of take-up in Q4 2017, although the increasing attractions of serviced office space and Brexit uncertainty could have an impact in the medium term.

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Shorter Leases ? More Moves ?

September 1, 2017 Leave a comment

New research from Estates Gazette suggests that office lease lengths are getting shorter and office relocations are becoming more frequent.

The research through EG Data shows that in five of the six big regional cities, average lease lengths, averaged for new and secondhand space, have fallen in the past 12 months compared with the previous 12 months.

OBI Property say: “For new larger requirements of more than 10,000 sq ft, particularly in newly built floorspace, I don’t see much evidence of a change in lease lengths – 10 years with a break at year five – but on the smaller requirements or in older stock, yes, leases are definitely getting shorter.”

EG data shows average Manchester lease lengths down to 6.8 years. Bristol average lease lengths are down from 8.1 to 7.1 years. Leeds leases are down to 5 years. Strutt & Parker/MSCI data suggests the UK average lease length for smaller office occupiers is 4.6 years, with 5.2 for larger occupiers.

Metropolis data suggests an average lease length of just over 6 years. Metropolis has noticed a growing trend of companies extending leases by 2-3 years while other options are assessed

In London, forthcoming lease expiries are set to rise from a relatively low 4.7m sq ft in 2017 to 6.7m sq ft in 2019:

London Lease Expiries (sq ft millions and number of leases due to expire)
2010 2.7 364
2011 3.8 513
2012 4.2 505
2013 5.1 521
2014 6.9 622
2015 6.1 708
2016 6 727
2017 4.3 709
2018 5.9 830
2019 6.7 893
2020 6.5 812

All occupiers with forthcoming leases are researched by Metropolis and clients are updated on tenant intentions.

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More frequent movers after Brexit ?

June 30, 2016 Leave a comment

Comment this week from the CEO of Citibase suggests that the market uncertainty triggered by Brexit will lead to even shorter leases, than the current 6-7 year average. Citibase say that the trend towards flexible working is growing, with businesses needing the ability to cope with unpredictable events such as Brexit.

If large numbers of foreign businesses move out of the UK it could lead to an increase in the supply of secondary office space. This would mean many landlords would look to make space income generating even if it meant accepting short leases.

Metropolis’ direct weekly research with hundreds of office tenants suggests increasing numbers looking for and being offered, short term leases of three years or less. In recent weeks Metropolis has reported on short term office lease agreements by companies such as insurer Manulife; retailer Monica Vinader; software group SanDisk; law firm Carbon Law and media group Ominicom. May more future requirements involve searches for flexible space on leases not exceeding five years.

Small businesses continue look to shed inflexible long-term leases in favour of flexible offices.

Citibase point out that long-term leases were dying out well before Brexit, but believe that the process will be hastened by the uncertainty of current market conditions.

If the average lease length falls even further, this implies that office moves will become even more frequent and could become a fact of life every five years for many firms.

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