Future of M25 Offices

Knight Frank have recently published a report on the future of the office market around the M25 motorway.

Key conclusions include:

The South East office market is a major attraction to occupational demand from the technology sector. The tech sector has accounted for, on average, 23% of annual office take-up in the region over the
last five years and has absorbed some 3.8 million sq ft of office transactions. Examples include Farnborough Business Park or the Aerospace Centre, which are driving technology sector take-up levels.

Also, occupiers drawn from other sectors have been transformed by the application of new technology to business processes, often fuelling new property requirements;  Gartner, Future Electronics, VMWare and
Service Now are major players in this field.

Co-working and flexi providers – not yet prominent within the M25 market – place tremendous emphasis on providing real estate and associated services that support the creation of a highly connected,
collaborative community housed within a modern, curated and highly serviced environment and could be a major sector in the future. The serviced and co-working offering is becoming increasingly sophisticated to take advantage of the major corporate occupier presence around Heathrow. This occupational drive toward greater flexibility and amenity is filtering into the business park model where Stockley Park and Bedfont Lakes become more service orientated.

Occupiers want to attract and retain talented staff. They will locate in buildings and locations that support them in this task. They are seeking what ‘talent magnets’; locations that have a buzz, vibrancy and cohesion. New growth areas are appearing in West London with White City, Imperial College and the redevelopment of Television Centre, propelling West London to become a recognised and established London hub;

The knowledge economy is the trump card for the South East of England over other regions and indeed other European location.

Metropolis is tracking around 50 major office requirements in the M25 region.

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Central London office lettings in July 2018

Central London office lettings in July 2018 reached just over 1.4m sq ft from 41 mid-large size office transactions (5,000 sq ft+) during the month. The July 2018 figure is comfortably above the current monthly London average of 1m sq ft.

July was characterised by 15 office deals over 20,000 sq ft, which were led by the Facebooks’s 600,000 sq ft deal to pre-let 11/21 Canal Reach and Building P2 Handyside Street, N1; WeWork’s 131,000 sq ft deal at Aviation House, WC2 and Houlihan Lokey’s 41,000 sq ft move to 1 Curzon Street, W1.

IT and technology services topped the table of lettings by sector, compiled by Metropolis, underpinned by the huge Facebook deal, plus a deal to Benevolent AI. This was followed by business services led by a number of lettings to WeWork and The Office Group. Financial services, professional and media were also well represented. Office deals ‘under offer’ in central London increased to 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 7pc of the office floorspace let in July 2018 at 100,000 sq ft. The West End saw 276,000 sq ft of take-up. Midtown contributed a record breaking 950,000 sq ft of lettings. Current London office demand is calculated to be around 3.6m 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 800,000 sq ft sq ft (57% 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 650 ‘live’ London requirements, with deals for space of up to 1.7m sq ft due to sign in the next few months.

Cityoffices is working 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

Regional Office Boost

CBRE’s recent report ‘United Kingdom Office – The Property Perspective H1 2018’ concludes that office mover activity in the regions outside London continued to be ‘lively’ during the first half of 2018

CBRE say that regional office occupier markets in the first half of 2018 with few signs of Brexit-related uncertainty. The ten regional cities monitored by CBRE, saw take-up reach nearly 3.9m sq ft, which was 24% above the five-year average and 37% higher than the 2.8m sq ft newly occupied in the same period of 2017.

CBRE saw large numbers of requirement in regional cities and say that relocation activity could have been even higher if there had not been a shortage of new office space in some cities. CBRE particularly point to shortages in Bristol, Edinburgh and Glasgow where the development pipeline has not kept pace with demand. These shortages will drive further pre-let and refurbishment activity.

Metropolis echoes the CBRE findings, with nearly 400 regional office requirement leads flagged to subscribers in the first half of 2018, together with a similar number of companies finding space for moves between January and June.

CBRE say that The UK’s flexible office space operators continued to expand, with Bristol, Birmingham, Glasgow, and the wider South East the stand out expansion locations in H1. Bristol witnessed a
notable increase in demand with a key deal to Runway East (30,000 sq ft). In Birmingham, deals were concluded with BE Group, Instant, iHub, Regus and Orega, whilst in Glasgow there were prominent deals to
Orega and Regus. In the wider South East region, flexible office space providers took nearly 200,000 sq ft with Slough and Reading the most popular locations. Runway East and other operators also have live requirements in all the regional cities, with CBRE predicting more activity from this sector in H2.

Regional cities saw a record year of take-up in 2017, with the public sector playing a large role in regional office space demand in H1 2018 (just over 0.9m sq ft). HM Revenue & Customs accounted for the three largest transactions ranging between 157,000 – 270,000 sq ft in Manchester, Glasgow and Liverpool.

CBRE forecast the West Midlands as a region to watch. They say the West Midlands is experiencing some of the fastest growth in the country – Birmingham itself seeing prices rise by 6.9% in the year to May Birmingham is attracting public sector bodies, looking for more affordable solutions away from London. The latest requirement is from the General Dental Council, relocating 200 staff London.

Central London Office Lettings in June 2018

Central London office lettings in June 2018 reached just over 1m sq ft from 58 mid-large size office transactions (5,000 sq ft+) during the month. The June 2018 figure is in line the current monthly London average of 1m sq ft.

June was characterised by 16 office deals over 20,000 sq ft, which were led by the Sony Picture’s 77,000 sq ft deal to take Brunel Building in Paddington; Trade Desk’s 54,000 sq ft pre-letting at Barts Square, EC1 and WeWork’s 49,000 sq ft at 70 Wilson Street, EC2.

Business Services topped the table of lettings by sector, underpinned by WeWork, Office Group and Foraspace deals. This was followed by professional services led by a number of lettings by sdeals to Herbert Smith and Kaplan. Financial services, technology and media were also well represented. Office deals ‘under offer’ in central London increased to 3.6m sq ft, and pending deal volumes are healthy in nearly all sub-markets, with a large number of deals pending.

By area, the City accounted for 40pc of the office floorspace let in June 2018 at 400,,000 sq ft. The West End saw 349,000 sq ft of take-up. Midtown contributed 126,000 sq ft of lettings, plus 50,000 sq ft of Docklands deals. Current London office demand is calculated to be around 3.3m sq ft in the City and 2.7m sq ft in the West End.

The volume of grade A (newly built or refurbished office space) let during the month reached 366,000 sq ft sq ft (37% 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 645 ‘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 Metropolis and the Cityoffices database from Andy King at andy@metroinfo.co.uk

Edinburgh’s Strong 2nd Quarter

Recent research by CBRE Scotland has pointed to a strong second quarter for Edinburgh’s office market, after a slow start to the year. Figures show a Q2 take-up of 351,916 sq ft of take-up – a 150% increase in take-up from Q1 2018, bringing office take-up in the first half of 2018 in Edinburgh to just under half a million sq ft (491,885 sq ft).

The recently announced pre-let to asset management firm Baillie Gifford taking over 60,000 sq ft at the newly developed Mint Building in St Andrew Square was possibly the stand out deal of the quarter, followed by other large lettings including 43,801 sq ft at 11-12 Lochside Place to Diageo and 14,832 sq ft at Atria One to EDP Renewables. The largest deal of the quarter was Edinburgh Palette (a workspace facility) occupying 109,153 sq ft of space at 525 Ferry Road, albeit on a short-term lease.

Metropolis is tracking around 40 occupiers searching for office space in Edinburgh. In general, tenant demand is considered to be buoyant, with a number of existing occupiers approaching lease expiries and seeking to relocate.

Meanwhile in the mid size range: The Scottish Public Services Ombudsman (SPSO) took 16,568 sq ft of out of town space at Bridgeside House, a Smart development at MacDonald Road, while Instant Offices, the serviced office provider, took 2,230 sq m (24,000 sq ft) of offices at the Cornerstone Building in South Gyle.

Total Edinburgh office supply remains at a low level at 923,540 sq ft, with 225,231 sq ft for city centre Grade A space. This represents a 30% decrease on the available space from the same period in 2017. The next scheme to complete is 2 Semple Street in Edinburgh city centre, which is due to be ready for occupation at the end of July 2018,  providing 38,648 sq ft of Grade A office accommodation across six floors.

CBRE say that there continues to be a number of larger, unsatisfied requirements for Edinburgh city centre.

London Office Lettings in April 2018

Central London office lettings in April 2018 reached almost 800,000 sq ft from 35 mid-large size transactions (5,000 sq ft+) during the month. The April 2018 figure is broadly in line with the current monthly average of 1m sq ft.

April was characterised by 13 office deals over 20,000 sq ft, which included Berwin Leighton Paisner’s 125,000 sq ft letting at Governor’s House, 5 Laurence Pountney Hill; St James’s Place’s 57,000 sq ft pre-letting at 30 Lombard Street, EC3 and KKR’s pre-let of 57,000 sq ft at 18 Hanover Square, W1.

Professional Services topped the table of lettings by sector, underpinned by BLP and KKR deals. This was followed by business services underpinned by a number of lettings by serviced office operators. Financial services, technology and media were also well represented. Office deals ‘under offer’ in central London increased to 3.6m sq ft, and pending deal volumes are healthy in nearly all sub-markets, with over 25 deals pending.

By area, the City accounted for 54pc of the office floorspace let in April 2018 at 433,000 sq ft. The West End saw 140,000 sq ft of take-up. Midtown contributed 80,000 sq ft of lettings, plus 45,000 sq ft of Docklands deals. Current London office demand is calculated to be around 3.3m sq ft in the City and 2.7m sq ft in the West End.

The volume of grade A (newly built or refurbished office space) let during the month reached 375,000 sq ft (47% 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 635 ‘live’ London requirements, with deals for space of up to 1.8m 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

Leeds Office Market Q1 2018

Take up of Leeds city centre office space has grown by 83 per cent in the opening months of 2018, according to the Leeds Office Agents’ Forum (LOAF).

Office leasing figures released by LOAF have revealed that 191,861 sq ft of office space was taken up by occupiers in the city centre in first quarter of 2018 as part of 28 office deals. This represents an 83 per cent increase on the same period last year and the strongest first quarter recorded for five years.

Of the 28 city centre transactions to complete, the largest was the 76,000 sq ft acquisition at 33 Wellington Street by Walker Morris and the letting to the Dart Group (Jets2) of the remaining 48,272 sq ft at The Mint was the only other city centre transaction above 10,000 sq ft. Both deals came after long searches. Out of town the largest deals were Balfour Beatty and Call Credit.

Leeds remains an attractive city for ‘northshoring’ attracting a number of companies looking to set up back office operations, whilst serviced office providers are becoming increasingly interested in opening new centres in Leeds.

There remain a healthy number of live requirements within the market. Metropolis is tracking up to 40 companies searching and a further 100 occupiers approaching decisions on upcoming lease expiries over the next two years