Edinburgh Boost

Recent figures on the Edinburgh office market in 2018 revealed that take-up totalled 855,000 sq ft (79,461 sq m) in 2018. This level of office lettings exceeds the ten year average for the fourth year running according to Cushman & Wakefield and just fails to beat the record 1.05m sq ft of office moves registered in 2017.

Some of the larger deals in Edinburgh last year include Baillie Gifford acquiring 60,000 sq ft at Chris Stewart Group’s 20 West Register Street, Royal London taking 47,000 sq ft from Aviva at 22 Haymarket Yards, Artemis taking 13,710 sq ft at Exchange Plaza and law firms Brodies securing 43,000 sq ft and Pinsent Mason taking 25,000 sq ft at BAM/Hermes’ new development at Capital Square. Diageo’s pre-let 11-12 Lochside Place and Charles River expanded at Clearwater House, Heriot-Watt Research Park and now occupy the full building

Metropolis ran 200 leads on Edinburgh occupier’s move intentions including 50 companies searching for alternative space and a further 60 which have yet to decide whether to view space.

The insurance and financial services sectors have been particularly active within Edinburgh, accounting for 45% of Edinburgh’s total take-up – while they typically form an active part of the market this is a 54% increase on the five-year average. Major occupiers are signing deals to pre-let the best new space under construction, leaving limited choice for occupiers coming to lease breaks who want to upgrade.

Vacancy rates have come down even further from 3.55 per cent in Q2 to 3.35 per cent in Q4.

Looking ahead, only future schemes at 2 Semple Street and 80 George Street are capable of providing supply of Grade A office space. However, over the longer term, Edinburgh now has its development hopes pinned on the future of the planned scheme at The Haymarket, following the sale to M&G.

Metropolis is currently tracking 40 Edinburgh based occupiers with future move plans and a further 60 office occupiers which are expected to come to a decision in 2019.

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London Office Market in 2018

Central London office lettings in 2018 reached just over 12.3m sq ft from 554 mid-large size office transactions (5,000 sq ft+) during the year. The 2018 figure matched the 2017 London take-up total, but with slightly fewer deals.

2018 was characterised by 167 office deals over 20,000 sq ft, which were led by two large deals Facebook in Kings Cross and The Chinese Embassy at the Royal Mint; followed by a clutch of smaller, mainly pre-let deals to Sumitomo, WPP, Sidley Austin and WeWork.

IT and business services topped the table of lettings by sector, compiled by Metropolis, underpinned by the Facebook deal and the large number of lettings to serviced office operators. This was followed by financial services led by lettings to Sumitomo, BGC and TP Icap. Insurance, professional and media were also well represented. Office deals ‘under offer’ in central London remained at 3.1m sq ft, and pending deal volumes are healthy in nearly all sub-markets, with a number of deals pending.

By area, the City accounted for 43pc of the office floorspace let in 2018 at 5.3m sq ft. The West End saw 2.5m sq ft of take-up. Midtown contributed 2.4m sq ft of lettings and Docklands 900,000 sq ft. Current London office demand is calculated to be around 3.7m sq ft in the City and 3.2m sq ft in the West End.

The volume of grade A (newly built or refurbished office space) let during the year, reached a healthy 6.5m sq ft sq ft (53% of the yearly total), as transactions for new space continued their recent strong showing. Availability is dominated by secondhand space in all London markets.

Metropolis research is currently monitoring 645 ‘live’ London office requirements, with pending deals for space of up to 1.4m sq ft due to sign in the next few months.

Details on Metropolis database from Paul Ives at paul@metroinfo.co.uk

Metropolis Movers October 2018

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’

Central London office lettings in October 2018

Central London office lettings in October 2018 reached just over 1.3m sq ft from 55 mid-large size office transactions (5,000 sq ft+) during the month. The October 2018 figure exceeds the current monthly London average of 1m sq ft.

October was characterised by 19 office deals over 20,000 sq ft, which were led by the McCann World Group’s 135,000 sq ft pre-let at 135 Bishopsgate, EC2 along with TP ICAP; BGC Partners signed for 129,000 sq ft at 5 Churchill Place, E14; Axa IM took a 65,000 sq ft pre-let at 22 Bishopsgate, EC3 and DAC Beachcroft took 50,000 sq ft at Walbrook Building, EC4.

Financial services topped the table of lettings by sector, compiled by Metropolis, underpinned by the TP ICAP and BGC Partners deals. This was followed by media led by lettings to McCann and TNS. Insurance, professional and business services were also well represented. Office deals ‘under offer’ in central London remained at 3.8m sq ft, and pending deal volumes are healthy in nearly all sub-markets, with a number of deals pending.

By area, the City accounted for 58pc of the office floorspace let in October 2018 at 750,000 sq ft. The West End saw 140,000 sq ft of take-up. Midtown contributed 100,000 sq ft of lettings and Docklands 130,000 sq ft. Current London office demand is calculated to be around 3.7m sq ft in the City and 3.2m sq ft in the West End.

The volume of grade A (newly built or refurbished office space) let during the month, reached a healthy 555,000 sq ft sq ft (43% 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 630 ‘live’ London requirements, with deals for space of up to 1.6m sq ft due to sign in the next few months.

Cityoffices is close to completing on its autumn ‘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 Metropolis and the Cityoffices database from Andy King at andy@metroinfo.co.uk

Manchester Offices and the Tech Sector

Knight Frank has recently published a report on Manchester’s  office market and the impact of the technology sector.

The consultant says that the city has evolved a significant tech market. Take-up within the Manchester market over the last five years (2013-17) shows that there were some 144 leasing transactions from occupiers within the IT & Telecoms sector. These deals accounted for more than 770,000 sq ft of office space – that is a volume of space greater than total 2017 take-up across all sectors in 6 of the 10 regional centres that Knight Frank monitor.

Notable transactions include: Amazon, Bet 365, Booking.com and Jaguar Land Rover, Recent research from Tech Nation, reveals that there are in excess of 30,000 digital jobs within the Manchester economy – which on generous space allocations of 1:8 is the equivalent to some 2.5 million sq ft of office space. These firms have a turnover of some £3.2bn – so they are significant contributors to the local and regional economy. The research also shows that Manchester has a vibrant digital eco-system which led to the birth of more than 450 new digital businesses in 2016. When those businesses are formed they have great growth prospects.

A third of Tech Nation’s Northern Tech 100 – that is the fastest growing tech companies in the North of England – are based in Manchester and have an average growth rate of 49% per annum. Four of the companies found on the list have recently let or acquired a total of 80,000 sq ft with a further 17,500 sq ft under offer at the time of writing.

Knight Frank are also aware of active requirements totalling around 100,000 sq ft from companies within the list. Microsoft, for example, have recently taken 100 desks within Bruntwood’s Neo Building
while both Amazon and Alphabet have a small presence in the city.

Over the same 5 year period there were 406 leasing transactions from companies across the 5 tech sub-sectors. They absorbed 1.4 million sq ft of office space over this time.

Knight Frank conclude that as Amazon and the like invest in the healthcare and insurance sectors, for example, the market will see space solutions that were not so long ago regarded as the exclusive domain of a few select, fast-growth tech companies becoming a reality for the many.

Metropolis Research is monitoring around 20 requirements in the Manchester market and 80 potential movers. Some 20% of companies are in the technology sector.

Central London Office Lettings in September 2018

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

September was characterised by 15 office deals over 20,000 sq ft, which were led by the Linkedin’s 83,000 sq ft deal to pre-let ‘The Ray’ office scheme on Farringdon Road, EC1; Beazley Insurance took 75,000 sq ft pre-let at 22 Bishopsgate, EC3 and Live Nation took a 66,000 sq ft pre-let at 34-36 St John Street, EC1.

IT related services topped the table of lettings by sector, compiled by Metropolis, underpinned by the Linkedin deal. This was followed by business services led by a number of lettings to WeWork and Orega. Insurance, professional and media were also well represented. Office deals ‘under offer’ in central London remained at 3.9m sq ft, and pending deal volumes are healthy in nearly all sub-markets, with a number of deals pending.

By area, the City accounted for 31pc of the office floorspace let in September 2018 at 310,000 sq ft. The West End saw 150,000 sq ft of take-up. Midtown contributed 450,000 sq ft of lettings. Current London office demand is calculated to be around 3.8m sq ft in the City and 3.2m sq ft in the West End.

The volume of grade A (newly built or refurbished office space) let during the month, reached a healthy 530,000 sq ft sq ft (53% 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 640 ‘live’ London requirements, with deals for space of up to 1.7m sq ft due to sign in the next few months.

Cityoffices is close to completing on its autumn ‘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 Metropolis and the Cityoffices database from Andy King at andy@metroinfo.co.uk

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.