What Do Office Tenants Want?

Savills’ fourth edition of ‘What Workers Want’ survey reviews and analyses the results from the UK respondents to identify key trends for landlords and office-based occupiers across all business sectors.

Savills say: Office trends are increasingly driven by the employee rather than the occupier. It is important that occupiers understand their employees’ needs when they relocate or open a new office. This is particularly important during the fit-out process when moving into a new office.

The main conclusions of the Savills survey are:

Location – office workers place a high importance on public transport connectivity and proximity to amenities.

Layout – Open-plan offices are the dominant layout preference for occupiers with 80% working in this type of layout, but 45% of respondents believe hot-desking decreases their productivity.

Comfort – 60% of office workers preferred to have their own dedicated desk. Only 34% of respondents have been asked for their views on the office environment by their employer.

Flexibility – Occupiers are encouraging their staff to work flexibly whether that be remote working or promoting hot-desking. However, a third of respondents believe the company they work for does not possess the relevant technology.

Technology – Landlords and tenants may be able to increase staff productivity by use of smartphone apps.

Deliveries – Occupiers and landlords need to consider how they can improve the provision of parcel lockers by potentially using redundant ground floor/basement space.

Break-Out – Landlords and tenants need to ensure there are appropriate break-out areas or purpose-built cafés for their staff.

The most important factor in an office worker’s ideal workplace was the comfort of work area with 92% of the respondents considering this as highly important.

The quality of Wi-Fi technology has become a key factor in the workplace. This was evident from the survey, as 80% of respondents believed this was an important component in their ideal workplace. Tenants are increasingly using smart technologies, which are also becoming incorporated into office buildings.

Further research by Metropolis has highlighted the importance of ‘smart buildings’ to potential incoming tenants.

Edinburgh Office Market Update

Metropolis ran nearly 50 business leads on Edinburgh occupiers relocating in the early months of 2019. There are nearly 200 office occupiers approaching lease events in the city in the next two years. Recent expansions are showing a rise in the number of financial services and technology companies taking space.

In Q1 2019, total office letting in Edinburgh reached 185,000 sq ft, of which nearly 60,000 sq ft was Grade A new office space. Figures from Savills show that 90% of Grade A deals came from Tech industries. The largest deals included Amazon signing for 30,000 sq ft at Exchange Crescent and Epic Games taking 10,000 sq ft at Quartermile 2. Over the past five years, Edinburgh has seen employment growth of 7% in the professional scientific and tech industries and is forecast to see a further 11% over the next five years.

Avison Young spotlight the wider Edinburgh office market, which also saw large deals. Two of the largest deals freehold purchases out-of-town with 49,000 sq ft to the Church of Scientology at Westfield House and 12,000 sq ft to Sime Hospitality at South Gyle Business Park. There were other mid-sized deals to CGI and Upward Mobility. Lloyds Bank is expanding into a 75,000 sq ft technology hub at its Scottish Widows’ headquarters.

In the centre of Edinburgh there has been a high concentration of sub 5,000 sq ft deals, with tech firms have particularly active in this size bracket, accounting for 33% of all take-up.

Analysts expect a boost in take-up for the business services sector over summer 2019, with a number of buildings under offer to providers of co-working serviced office space.

Avison Young reveal that overall availability in the city centre amounts to 448,000 sq ft, which is less than a year’s supply based on the recent past demand. Although future supply was boosted when M&G Real Estate has instructed Qmile Group to build its mixed-use Haymarket scheme, which includes 350,000 sq ft of office space. There is currently around 55,000 sq ft remaining at Capital Square ahead of completion in May 2020, 2 Semple Street has 35,000 sq ft available, and 30,000 sq ft of sub-let space is on offer at 20 West Register Street.

Looking ahead, with a vacancy level of 3%, more pre-letting looks likely. Metropolis is tracking around 30 confirmed and potential medium/large office searches in Edinburgh.

The Evolution of Office Space

A recent blog from property consultant Savills, looked at the trends for the future of office space and some of the implications for market players. Savills say that the sector has progressed beyond putting a roof over workers’ heads, instead landlords and service providers need to be tuned to meet the needs of modern occupiers in order to attract businesses in an increasingly competitive landscape.

The relationships between landlords, tenants and staff has shifted. Building owners can no longer rely on the fact that they have four walls and a plug socket; but instead have to offer a best-in-class service if they want to entice occupiers to let their space. In turn businesses must provide their employees with a stand-out working environment if they want to both attract and retain the best staff.

So what are the emerging trends

Savills’ last What Workers Want survey showed that the workplace can have a significant impact on employees’ physical and mental health. Some of the measures that have caught the headlines have included running tracks on roofs, yoga studios and health-conscious canteens, but this is just the start. Savills predict more on-site GPs, crèche facilities and lockers for online retail deliveries to maximise employees time and productivity.

As well as the emphasis on wellness, there is also a need for greater sustainability and the impact that space might have on the wider environment. For this reason recycling, waste and energy consumption has never been so important. Metropolis finds increasing numbers of occupiers require office space with high levels of BREEAM standards as well as flexibility.

Metropolis has seen a high level of short leases negotiated in recent years alongside a trend for a floor by floor expansion by occupiers within an existing part-occupied building. In addition, refurbishment tenders incorperate a high level of IT utilisation and are now increasingly including flexibility to provide step free access.

Savills say that ultimately, landlords need to take the lead from the serviced office sector which is constantly adapting to create fresh ways of working to meet occupiers’ changing needs.

 

Cambridge Office Market

Savills has just published its September 2018 report on the Cambridge office market.

Savills say that the majority of take-up in Cambridge, whether for offices and/or laboratories, has occurred in the city centre (Zone 1) around the central station and Hills Road. This area has accounted for 38% of take-up by square footage up to summer 2018.

Available offices total 100,000 sq. ft. of existing stock in this area currently. At current levels of demand Cambridge has less than one years’ supply. The city centre market has around 156,000 sq. ft. under construction, of which 30,372 sq. ft. is pre-let. Developer confidence is growing outside of the city centre. St Johns College and Turnstone recently completed the 65,000 sq ft Maurice Wilkes Building at St John’s Innovation Park which was let to seven occupiers prior to practical completion. Biomed Realty is speculatively developing 108,000 sq. ft. of laboratory space at Babraham Research Park across two new buildings and Churchmanor Estates are speculatively developing 40,000 sq ft. In addition the Howard Group are to speculatively construct over 60,000 sq ft of office/R&D space at Pampisford. Savills expect record rents to be achieved in the city centre at 50 & 60 Station Road.

Astra Zeneca is soon to complete its new campus of 850,000 sq ft. Samsung has recently committed to opening a new AI research hub in Cambridge. Microsoft also have a research base covering AI at 21 Station Road.  Darktrace is moving to The Maurice Wilkes’ Building at St John’s Innovation Park. Amazon took 72,289 sq ft at One Station Square, CB1, while Astex Pharmaceuticals took 42,688 sq ft at Cambridge Science Park. Also at Cambridge Science Park, in Q1, Huawei acquired 11,500 sq ft at Building 101 for £29.50 psf. Savills is also aware of 100,000 sq. ft. of requirements from serviced office operators and envisage stronger demand from this sector in the future.

Metropolis is tracking around 40 Cambridge office moves and requirements.

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.

Cardiff on the Rise & Merry Christmas

A recent report from property consultant Savills highlighted the upsurge in office demand in Cardiff and forecast that rents would reach £25 per sq ft in 2016.

The report concluded that total take-up at the end of Q3 stood at nearly 300,000 sq ft (27,860 sq m) and with the last two months registering significant prelets, including the 150,000 sq ft letting at Central Square to the BBC and Public Health Wales pre-letting 4,645 sq m (50,000 sq ft) of new offices on four floors at the under construction 2 Cathedral Quarter; the annual take-up total will reach 600,000 sq ft a 10% increase on 2014 and 20% up on the ten year average.

Earlier in the year, Cardiff saw major moves from Baccalaureate Organisation taking 48,500 sq ft and SSE taking 46,851
at Cardiff Gate Business Park.

Savills predict that One Central Square and 2 Capital Quarter buildings, could be fully let by early 2016. Therefore the main schemes in the pipeline are refurbishments including 50,900sq ft at St Patricks House, 35,000 sq ft at 2 Kingsway and 16,953 sq ft at Haywood House North on Dumfries Place,.

Metropolis is tracking over a dozen medium or large companies searching for office space in Cardiff.

Merry Christmas and a Happy New Year to all Metropolis blog readers from all the staff at Metropolis.

Cardiff take-up doubles

Savills latest Cardiff office market report, reveals that office lettings in 2014 are up 102% on the same period in 2013 reaching 250,000 sq ft by mid year and surpassing the 300,000 sq ft let in 2013 by the end of Q3 2014.

There are several requirements over 20,000 sq ft including Geldards, PWC and Blake Morgan which, could further boost the take-up figure over the next year. The recently announced 150,000 sq ft BBC deal could mean that 2014 transactions could reach 500,000 sq ft, which is 69% up on last year’s figures.

Recent large office transactions over 2,323 sq m (25,000 sq ft) include International Baccalaureate Organisation taking 4,506 sq m (48,500 sq ft) at Cardiff Gate and Welsh Health Estate Shared Services taking 3,670 sq m (39,500 sq ft) at Companies House. This trend is set to continue with a number of larger recent deals in Q3 reported on Metropolis including Velindre NHS Trust for 3,362 sq m (36,200 sq ft), Finance Wales for 2,044 sq m (22,000 sq ft) and Cunningham Lindsey for 20,000 sq ft (1,858 sq m).

On the supply side, the City of Cardiff Council and Rightacres Property have revealed details of their proposed Foster + Partners-designed masterplan for the regeneration of Central Square in Cardiff. The plan includes more than 1m sq ft of office, retail and residential buildings around a new civic square. The new BBC Wales HQ will anchor the scheme which has also been designed by Foster + Partners and is scheduled for completion in 2017. There will be also be a further 46,500 sq m (500,000 sq ft) of speculative office space.

Metropolis is about to publish its Q3 2014 regional office market report for current and forthcoming subscribers.