Requirements on the Rise?

Over the first two months Metropolis Property Research has noticed a small rise in the numbers of office occupiers launching new searches for office accommodation.

Some examples researched and published over the past week include:

  • An IT support firm, has told Metropolis that it is currently searching for around 200 sq m (2,200 sq ft) of office space within the South Bank area of London. The firm is planning to move from its current base in the Autumn of 2018;
  • A City of London-based energy consultancy, has told Metropolis that it has appointed an un-named property agent to advise on relocation or lease options in central London, ahead of a late 2018 lease break option. The company currently occupies 465 sq m (5,010 sq ft) of offices with about 35 staff;
  • A computer consultancy firm, has told Metropolis that it is currently searching for around 475 sq m (5,100 sq ft) of office space in the Maidenhead area. Staff advise that a move date has not been set, but that it will likely take place around Autumn 2018.;
  • An energy exploration company, has strongly hinted that it is considering launching a search for alternative London West End offices in 2018;
  • An IT consultancy firm, has told Metropolis that it is currently searching for around 220 sq m (2,400 sq ft) of office space in Bristol. A senior contact has stated that an ideal move date would be around October or November 2018;
  • A Leeds headquartered print management company, is planning to open an office in London by 2020;

Metropolis researches around 140 new office requirements each month in the UK, plus hundred of other companies pondering move decisions and agreeing lettings.

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Metropolis Office Movers in November 2017

Metropolis ran 640 business leads on ‘office movers’ in the month of November 2017. If all reported moves were added together the total would exceed 12 million sq ft of office searches and transactions, researched by Metropolis’ unique market led intelligence research team. London was the largest region with 288 leads during month, but there were also strong showings from the South East (64), North West (63) and Scotland (39). Business services, IT and financial services were the largest business sectors planning relocations or agreeing moves during the month.

The business leads 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 640 November leads, included those on Facebook, Channel 4, WeWork, Bupa and Lloyds.

The November 2017 leads included 214 ‘identified requirements’. Which means that the company confirmed to researchers that it has current or future plans to search for alternative office space. Of these 214 searches, 124 were new office searches, not previously notified to clients.

The most recent research also included 149 ‘potential movers’ which were mainly longer-term leads on occupiers, considering a 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 2020.

Recent research by Metropolis concluded that a conservative estimate of ‘live’ business 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 Simon at simon@metroinfo.co.uk

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Cityoffices.net, the sister property leads service to Metropolis, has published its ‘Autumn 2017’ survey on the office construction market in central London, with details of new schemes starting, the dozens of schemes at preparation stage and 200 office schemes in the pipeline for construction starts in 2017-2020.

For more information on Cityoffices, email Andy at andy@metroinfo.co.uk

The Magnificent Seven

A recent report from Savills reveals that for a fourth consecutive year, UK regional city office take-up has surpassed the long term average of 9.1m sq ft. Total take-up in 2016 reached an impressive
9.6m sq ft, despite a year of political uncertainty.

The final quarter of regional office take-up in 2017 reached 2.4m sq ft, the strongest quarter since Q2 2015. Roughly the same level of occupational demand was recorded during the first half and second half
of the 2016, with no post referendum slowdown evident.

The most active of the seven major UK cities in 2016 were Bristol and Cardiff, which recorded take-up improvements of 42% and 10% on 2015’s levels respectively, with Cardiff achieving its highest level of take-up in 15 years. A key driver of occupational demand in these cities was the Government Property Unit (GPU) requirements for consolidating public sector bases into regional hubs. Savills expect the GPU to be the key contributor to acquisitions over 100,000 sq ft in 2017 in cities including Birmingham, Manchester, Leeds, Edinburgh and Belfast, during 2017.

The most active business sectors during 2016 were the insurance and financial services sector, accounting for 1.2 million sq ft (15%) of space taken, which marked a record year. Key deals include: Swinton
Insurance taking 165,000 sq ft at 101 Embankment, Manchester, whilst MotoNovo Finance took 72,000 sq ft at One Central Square, Cardiff.
The tech sector remained an important contributor to take-up during 2016 and accounted for 20% of the number of transactions. This sector has traditionally contributed to the smaller end of the market, but also included Co-op Digital acquiring 45,000 sq ft of accommodation in Manchester, while Micro-chip designer, Cirrus Logic’s 70,000 sq ft letting at Quartermile, Edinburgh marked the largest regional tech deal last year. Edinburgh witnessed the highest proportion of tech take-up of all the UK cities.

Metropolis ran 53 medium and large office requirements for Birmingham in 2016, totalling 1.4m sq ft; the totals for other cities were Bristol 66 requirements and 1.6m sq ft; Cardiff 35 requirements and 1.1m sq ft; Edinburgh 65 requirements and 1.5m sq ft; Glasgow 51 requirements and 1.4m sq ft; Leeds 74 requirements and 2m sq ft; Manchester 90 requirements and 2.5m sq ft.
A shortage of Grade A floorspace in city centres,  prompted occupiers to look out of town as total fringe/out of town take-up reaching 2.8 million sq ft, eclipsing the record level set during 2014. Occupiers were also attracted out of town offices due to availability of larger floorplate stock and cheaper rents, particularly in the Manchester and Glasgow markets. Glasgow was boosted by the University of the West of Scotland’s 225,000 sq ft pre-let of the Eco Campus.

Overall, 44% of the 3.6m sq ft of regional office space currently under construction across the UK regions has been pre-let. Examples include PwC’s part pre-let of One Chamberlain Square in Birmingham
There are 8 million sq ft of known lease expiries over the next five years, there also remains underlying demand for new space, with the likely strongest performers for 2017 predicted to be Leeds, Cardiff and Bristol. There is a shortage of Grade A space, particularly in Bristol and Manchester. Top regional rents remain low relative to Central London.

The Metropolis view is that demand is holding up well in regional cities with 130 new requirements added to the database for the seven largest cities outside London in Q1 2017.

17% of Office Occupiers Hunting

A recent report from the real estate division of UK national law firm Irwin Mitchell surveyed tenants attitudes to the properties they occupy, what their plans are for the future and relationships between landlord and tenants relationships.

The firm spoke to senior decision makers at over 250 companies, who together employ a total of 111,680 staff. The companies range from smaller companies employing less than 200 people to the largest who employ over 6,100 staff. 

Irwin Mitchell asked businesses whether they were planning to change their business premises requirements in the next 12 months. Whilst over 80% of businesses said they intend to stay in the same premises in the next 12 months, 16.8% plan to relocate or take on more space and only 2.4% said they planned to reduce space. The availability of finance did not seem to be a factor in influencing this decision with 88% of respondents saying it did not impact on their planning and only 12% saying that it did.

These figures overlap with Metropolis research, which finds that over 1,000 UK companies currently have requirements to relocate in the next two years or are approaching a lease expiry, which as a proportion of all office space transacted and recorded by Metropolis in the last ten years, represents some 20% of the market.

The UK survey asked what the most important factor was in their premises decision-making. In total 69% of the businesses placed  location first. The second most important factor was cost, followed by workforce accessibility and transport links. Of all the factors, energy efficiency was the least important, with no businesses classing it as a top priority.

The responses chime with a snapshot survey of 100 London occupiers, carried out last quarter by Irwin Mitchell, which also showed that location (34%), and then cost (24%) were the most important factors in making property decisions. In London, the quality of the building was ranked third (14%), perhaps illustrating a need to attract employees by taking good quality space.

The survey also asked about increased online working practices, and 43% consider that this will result in businesses
requiring less office space in the future, balanced by 40% thinking requirements will stay the same. Only 16% of businesses thought online working would mean they would need more office space. However, only a very small percentage said they personally plan to reduce their premises requirements in the next 12 months due to online working, indicating that a reduction in office space requirements due to online working may be a longer term trend.

Metropolis research has found that landlords have adapted to the recession, downsizing and companies needing less space by offering shorter leases (averaging not much more than 6 years) and falling rents in real terms. Although there are signs of lease lengths and rents starting to rise in London as office availability shrinks.

It appears that business occupiers attitudes to property are becoming increasingly confident in the context of an economic upturn.  Landlords are more flexible and accommodating than in the past. In recent years landlords have had to improve their offer to attract the best tenants in difficult markets.

With 17% of businesses saying they plan to expand or relocate, but the majority wishing to stay in-situ this situation will be particularly critical in London, as the balance of power swings back towards landlords due to declining office supply.

Metropolis in 2014

A happy and prosperous 2014 to all Metropolis Blog readers.

This year we plan to bring you an even bigger range of comment and analysis of the UK office demand and supply market on a monthly basis. Features will include focus on various UK regional office markets, trends in the London office market and inside commentary on some of the recent office market reports released by various market commentators.

All articles will feature examples from Metropolis’ huge database of forthcoming office relocation stories, covering small 15 person moves upto the largest 100,000 sq ft requirements.

Sit tight and enjoy the ride!