Metropolis London Skyline Report

The London Wrecking (Christmas) Ball

or “What Comes Down Must Go Up”

abridged

 

 

 

 

 

Metropolis and Cityoffices have completed their bi-annual ‘Skyline’ survey of the central London office development market for the period April 2015 to October 2015. The survey takes a snapshot of the central London office construction in Q4 2015, recent completions, recent pre-letting activity and looks ahead to future pipeline projects that will shape the next three years.

There are now 78 office schemes under construction in central London (compared to 74 six months ago) totaling an increased 11.1m sq ft (9.5m sq ft in April 2015). In the last six months there have been 31 new scheme starts, totaling 3.4m sq ft, including major new-builds such as the 866,000 sq ft 100 Bishopsgate in EC3, the 400,000 sq ft 10 Fenchurch Place in the City of London and the 228,000 sq ft 33 King William Street (33 Central) in EC4.

 

 

 

 

 

 

The City dominates construction with 6m sq ft of new office space in schemes now underway (up from 4m sq ft in early 2015). There is now 500,000 sq ft of office space under construction at Kings Cross, with more at site clearance stage. The West End, including Paddington, has 2.7m sq ft under construction and a further 600,000 sq ft of office build is on-site in Midtown, but Southbank and Docklands still lag behind the rest of London.

The big story is the forthcoming space at demolition stage, with over 7m sq ft lined up to start in early 2016 and more to follow later in the year. In reality, further schemes currently at planning stage will add to these numbers, particularly the 2017 and 2018 totals. Therefore we expect development completions in 2017 and 2018 could reach 7-8m sq ft.

Looking ahead, some 33 future schemes are currently at site preparation stage with 7.2m sq ft of additional office space due to go under construction in the next 6 months. Many of these schemes will not be completed until 2017 or 2018, however it is clear there is a strong development pipeline.

 

The full Skyline report is currently available to Metropolis clients. Further details on the Metropolis service can be found at http://www.metroinfo.co.uk.

Copyright Metropolis Property Research Ltd 2015

 

Metropolis Office Requirements – H1

Over 450 companies vie for London space

 

 

 

 

 

 

 

Metropolis research identified over 17m sq ft of UK office demand in the first half of 2015. Just over 9.2m sq ft of this demand was for office space in Greater London, with over 450 companies searching for London space. In the rest of the UK Metropolis uncovered 400 requirements for new space representing 8.1m sq ft of office demand.

Central London office demand reached 8m sq ft, 3.8m sq ft (47.5%) of which was focused on the City of London. EC2 was the most popular postcode for companies planning a move,  with 1.4m sq ft of demand emerging in H1.

A significant proportion of total City of London demand (11%) came from two new law firm requirements, each firm looking for 200,000 sq ft. A new 150,000 sq ft requirement from an insurance group was also worthy of note. Demand from the banking and finance sector reached 1m sq ft, 26% of total City of London demand.

Demand for space in the West End, where rents can reach £125 psf, hit 1.8m sq ft. The largest West End requirement (150,000 sq ft) came from a social media group looking for offices in SW1. Just over 400,000 sq ft of office space (26% of total demand) was required by the banking & finance sector, 79% of which (315,000 sq ft) came from hedge funds and private investment firms.

Mid Town office demand reached 0.9m sq ft, pretty evenly split between WC1 and WC2. About 100,000 sq ft of Mid Town demand came from the technology sector and 90,000 sq ft from the media sector. Demand from law firms was just over 120,000 sq ft and demand from the banking and finance sector totalled 110,000 sq ft.

The largest office requirement in the South Bank (SE1) was a 140,000 sq ft search by an engineering and construction firm. Other requirements of note include a US insurance firm switching a 60,000 sq ft search from Maidenhead to London SE1, and a TV Broadcaster looking for 30,000 sq ft to house its news department.

Two big requirements dominated demand for office space in the Docklands: a German investment bank back office requirement for 350,000 sq ft and an information company requirement for 300,000 sq ft, with a sub-let mooted.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Top 5 Regional Cities

Manchester – The largest requirement, 400,000 sq ft, was a search by a government department considering space near Piccadilly Station in Manchester. Just over 250,000 sq ft of Manchester office demand came from the legal sector and 300,000 sq ft of demand was attributed to the insurance sector.

Edinburgh – Similar to the picture in Manchester, Edinburgh demand was dominated by a large government requirement for office space (300,000 sq ft), although this requirement could move to Glasgow. In terms of private sector demand, notable requirements included a 100,000 sq ft search by a US Bank and two significant searches from law firms seeking a move in central Edinburgh, one for 50,000 sq ft and the other 30,000 sq ft. There was also significant demand from the accountancy sector, with four firms searching for just over 130,000 sq ft.

Birmingham – A retail bank was linked with the largest office requirement in Birmingham: 170,000 sq ft,  a search now satisfied by space at Miller Developments Arena Central scheme.  Other significant requirements include a potential 100,000 sq ft search from a law firm and a 50,000 sq ft search from a business education group.

Reading – The largest requirement for Reading offices came from a network broadcaster looking for 150,000 sq ft, closely followed by a utility company searching for 140,000 sq ft. Both requirements also consider other Thames valley locations such as Bracknell, Farnborough and Slough.

Bristol – Bristol office demand was dominated by insurance company requirements, with the sector accounting for 56% of total demand (280,000 sq ft). Other notable requirements include an 80,000 sq ft search from a Bristol based law firm planning to combine two of its offices (which may now be a refurbishment and extension of the existing building) and an engineering group searching for 25,000 sq ft.

 

Top Ten Cities (Excluding London) by H1 Office Demand

 

 

 

 

 

 

 

 

 

 

Copyright Metropolis Property Research Ltd 2015

 

 

Metropolis Office Requirements – Q1 2015

9.6m sq ft of demand

The Metropolis team researched over 455 UK company office requirements in Q1 2015, representing 9.6m sq ft of office demand.

5.5m sq ft of this demand was for space in Greater London, 4.3m sq ft of which was demand for central London space. 4.1m sq ft of demand was identified by our team in the rest of the UK.

Demand for City of London space continued to be strong during Q1, with 2.1m sq ft required in over 91 planned office relocations. Four of the top five requirements by size were searches by banks with the other a significant requirement from a major accountancy firm. The top five requirements were moves planned in 2016, 2017 and 2018. EC2 demand made up 42% of the total central London space required.

0.8m sq ft of demand was identified in the West End of London, 0.5m sq ft in London SW1 and 0.3m sq ft in London W1. Two of the top five requirements by size were searches by banking and finance companies. All of the top five largest moves are planned for late 2015 and 2016.

Mid Town office demand was mainly focused on London WC2, with two of the largest requirements centered on this postcode. One of the most significant requirements identified was an 80,000 sq ft HQ search by a TMT company planning a move in 2017.

In London SE1, where 0.3m sq ft of demand was researched, the largest requirement came from a construction group. In E14, a 400,000 sq ft requirement from an investment bank made up 66% of the 0.6m sq ft of total demand for offices in the area.

Banking & Finance sector UK office demand reached 2m sq ft in Q1 2015. The largest searches centered on the City of London and Docklands, although there was a notable search for 175,000 sq ft of space in central Birmingham.

0.8m sq ft of demand was identified from the Technology & Telecoms sector, and similar to banking and finance was largely focused on the City of London. There were however also significant searches for space in Manchester and Newcastle-upon-Tyne.

The largest government requirements were for space outside of central London, the most significant a search for over 400,000 sq ft in Manchester. The largest media sector requirements centered on fringe central London locations and the top three law sector requirements were for space in Birmingham, Manchester and Bristol.

 
Metropolis is currently tracking over 700 unique searches for space in London and over 400 in the rest of the UK.

 

 

Top Ten London Business Sectors

 

 

 

 

 

 

For the sixth year running, Banking and finance leads dominate the London business sector top ten. The largest search for space emerging from this sector in 2014 was a 300,000 sq ft requirement for HQ offices in London EC3, closely followed by a 200,000 sq ft office requirement in London EC2 and a similar sized requirement from a bank looking in EC4. Total new office demand in London from this sector was 4m sq ft.

Office demand from hedge funds amounted to just under 250,000 sq ft, with the average requirement a search for about 10,000 sq ft and the most popular postcodes London W1, SW1 and WC2. Demand from financial investment firms was 800,000 sq ft, with the most popular postcodes London EC2, EC3 and EC4.

Newly identified office demand from the media sector in London was about 2.5m sq ft. The largest search was a 300,000 sq ft requirement for HQ space in London W6. Other significant searches focused on London EC1 and SE1. The technology and telecoms sector, often grouped with Media under the banner “TMT”, had a similar preference for space in these postcodes, with space in WC1 and N1 also of considerable interest. Technology and telecoms demand for London offices was just over 1.5m sq ft.

 

 

 

 

 

 

London office demand from the law sector remains strong, with 2m sq ft of new requirements identified last year. London EC2 and EC4 remain the most popular postcodes for this sector, although a significant number of 30,000 sq ft searches centered on London WC1 and WC2. There were over 40 confirmed law firm lettings last year, with 50% of firms yet to move.

New insurance sector office demand centered on London EC3, with 700,000 sq ft of space required in this postcode last year, matching 2013 demand. Another 300,000 sq ft was required by this sector, mainly in EC2.

In central London, Metropolis identified just over 14m sq ft of new requirements for offices. The top 5 most sought after postcodes areas by demand were: EC2 (3m sq ft), EC3 (2m sq ft), EC4 (1.6m sq ft), E14 (1.5m sq ft) and W1 (1.4m sq ft).

 

 

 

 

 

 

There is currently a healthy level of competition for good quality completed and pipeline space in central London. We expect 2015 to be another good year for London fit-out, as companies continue to occupy space pre-let in previous years.

According to our research office take up in 2014 reached 12.7m sq ft, up 5% on the 2013 total. Take up in 2015 is also likely to be strong, but may not grow again by quite the same margin. Metropolis is currently tracking just over 12m sq ft of live office requirements in London and is picking up moves, on average, over 18 months before a deal is signed.

Copyright Metropolis Property Research Ltd, January 2015

 

Metropolis 2014 Lead Research Review

1,000 new office requirements

The Metropolis research team produced a total of 6,154 relocation, construction and refurbishment leads in 2014. Over 26% of these were active UK office space requirements, in line with 2013 and 2012 research results. 1,613 office requirements were confirmed in total, with 1,000 new office requirements uncovered by our research. New office requirements accounted for 22.5m sq ft of UK office demand.

60% of Metropolis leads were projects located in the South of the UK (61% in 2013, 63% in 2012, 61% in 2011, 2010 and 62% in 2009), with 40% of lead projects located in Wales, the Midlands, North, Scotland and Northern Ireland. Greater London projects represented 48% of the 2014 lead total, 3% above the 2013 proportion.

 

 

 

 

 

 

 

In Greater London, Metropolis identified just over 18m sq ft of new requirements for offices, with over 800 companies looking for new space. Just over 14m sq ft of this demand was for central London space. The top 5 most sought after postcodes areas by demand were: EC2 (3m sq ft), EC3 (2m sq ft), EC4 (1.6m sq ft), E14 (1.5m sq ft) and W1 (1.4m sq ft).

Office relocation and refurbishment activity continues to be strong in the North West of the UK. Metropolis identified 1.2m sq ft of new office demand in the region, 61% of which was demand for Manchester space. The largest requirements emerged from banking and IT companies.

In the South East (excluding London), the largest office relocation and refurbishment projects were located in Buckinghamshire and Oxfordshire. Demand for new office space in the South East reached 2.4m sq ft and 39% of this demand was for offices in Berkshire.

Leads numbers in Scotland were 28% down on 2013’s record result (120% up on 2012), however the region is still the UK’s 4th most active according to our research. Metropolis identified 800,000 sq ft of new office demand in Scotland as a whole in 2014, 50% of which was centered on Edinburgh.

In Yorkshire and Humberside, just under 700,000 sq ft of new office requirements were identified, with 71 companies looking for new space. Demand for new space in Leeds accounted for just over 500,000 sq ft.

West Midlands lead numbers were largely on par with results over the past three years. Just under 0.5m sq ft of new demand was identified in Birmingham.

In the South West, just under 700,000 sq ft of new office demand was identified. Bristol was the preferred location for large government, education, energy and insurance company moves. Office take-up in Bristol last year reached 1.2m sq ft.

Lead numbers in the North jumped by 22%, the highest number of relocation, refurbishment, and construction projects recorded in that region since 2011. 23% of office demand in the region centered on Newcastle-upon-Tyne.

 

 

 

 

 

 

 

 

 

 

 

UK Lead Projects by Size

55% of Metropolis leads in 2014 reported on projects over 10,000 sq ft. 46% of leads were made up of projects between 5,000 sq ft and 30,000 sq ft. 74% of leads covered projects over 5,000 sq ft. The increase in lead projects between 1 and 2,000 sq ft was influenced by a significant number of central London office, residential and hotel redevelopment schemes unseating existing tenants.

 

 

 

 

 

Top 10 Business Sectors – UK Relocation and Refurbishment Projects

The Banking & Finance Sector leapt ahead of Technology & Telecoms in 2014 and was the strongest UK business sector in terms of relocation and refurbishment projects. Lead numbers within this sector grew by 7% when compared to 2013, the strongest showing in the last five years. The largest requirements in this sector were unsurprisingly targeted at London space. Four of the top five office requirements were searches by Banks in the City of London. Banks & Financial service companies also had 50,000 sq ft + requirements for office space in Birmingham, Manchester, Southampton and Bristol.

 

 

 

 

 

Newly identified demand for office space from Technology and Telecoms companies in the UK hit 2.1m sq ft last year. Requirements for space in London accounted for 50% of this figure. The largest searches for offices outside of London targeted Slough, Glasgow, Warrington, Manchester and Oxford. Office demand from media sector companies, often grouped with Technology and Telecoms under the banner “TMT”, reached 1.5m sq ft. London, particularly SW1 and WC2, was the overwhelmingly preferred location for this sector.

The top ten law firm office relocation projects by size were all located in central London, predominantly the City, particularly London EC4 and EC2. However there were two 70,000 sq ft + requirements for space from this sector in Leeds and a 100,000 sq ft requirement in Manchester.

The industry consensus is that London and the south east outpaced the rest of the UK in 2014 as they are further ahead in the cycle, but the predictions are that the regions will begin to pick up in 2015. This is likely to drive an increase in speculative developments and a rise in rents, which will in turn lead to more demand for offices in regional cities. In London, availability will fall again leading to more development and more relocations to fringe central London locations.

Copyright Metropolis Property Research Ltd, January 2015

 

Good year for Glasgow

A recent office market report on Glasgow by Knight Frank highlighted an excellent year for office lettings in the city. Office take-up for the year reached 700,000 sq ft, which was 30% above the ten-year average (see below).

 

 

 

 

 

 

 

The largest deal was Scottish Power’s 220,000 sq ft pre-let St Vincent Street HQ, but there were also significant lettings to Brodies Solicitors taking 25,000 sq ft, Atos (37,000 sq ft), Ashurst Solictors (25,000 sq ft), JP Morgan (21,000 sq ft), SAS Software (20,000 sq ft), KPMG (15,000 sq ft), Speirs & Jeffrey (15,000 sq ft) and Skyscanner (11,000 sq ft).

The Metropolis database reveals just over 30 outstanding office requirements in Glasgow, including Teleperformance and Ministry of Justice looking for 30,000 sq ft each and Aquira looking for 20,000 sq ft each. The thirty firms are currently searching for a total of over 300,000 sq ft of office space in the city, although this includes a lot of sub-5,000 sq ft searches. There are another 35 firms due to make decisions ahead of lease expiries in 2014 and 2015.

Total availability of office space in Glasgow, both second-hand and newly constructed or refurbished, has fallen 400,000 sq ft, but only two new buildings fully available for letting.

Three Glasgow office schemes are under construction: Abstract Securities’ 170,000 sq ft St Vincent Plaza; Bam Properties’ 163,000 sq ft 110 Queen Street and M&G Real Estate’s 140,000 sq ft 1 West Regent Street. Agents expect over 450,000 sq ft of new office space to be completed in 2015 and a number of existing Glasgow occupiers are expected to negotiate pre-lets.

The outlook is that a number of high profile office letting deals are likely to be signed over the next 12-18 months as the new office space comes online. There are also additional sites in the pipeline awaiting pre-let interest. Glasgow is also likely to feel some gain to its profile from the 2014 Commonwealth Games which could help inward investment.

Metropolis 2013 Research Review

REQUIREMENTS BOOST

The Metropolis research team produced a total of 6,537 relocation, construction and refurbishment leads in 2013. Over 26% of these were active UK office space requirements, in line with 2012 research results. 1,745 office requirements were confirmed in total, with 1,056 new office requirements uncovered by our research, up 6% on 2012’s total and 19% on 2011’s.New requirements accounted for over 22m sq ft of UK office demand.

61% of Metropolis leads were projects located in the South of the UK (63% in 2012, 61% in 2011, 2010 and 62% in 2009), with 39% of lead projects located in Wales, the Midlands, North, Scotland and Northern Ireland. Greater London projects represented 45% of the 2013 lead total, a close match to the 2012 proportion (46%).  

Leads in Scotland saw a 120% increase when compared to 2012’s lead total, boosted in part by energy sector requirements in Aberdeen and an upturn in the Glasgow office market. West Midlands lead numbers saw an increase for the second year running, with several new Birmingham office requirements emerging from the law and insurance sectors. Results for other Northern  regions were broadly in line with expectations, with North West lead numbers slightly down on last year’s result but still up on 2011, 2010 and 2009’s totals.

London and South East lead numbers were very similar to 2012’s totals.  In terms of Greater London office requirements, the top 5 most sought after postcodes areas by demand were:  EC2 (3.6m sq ft),  W1 (3.2m sq ft),  EC4 (3m sq ft), SE1 (2.7m sq ft) and EC3 (2m sq ft).

 

UK LEADS BY PROJECT SIZE – 53% of Metropolis leads in 2013  reported on projects over 10,000 sq ft. 46% of leads were made up of projects between 5,000 sq ft and 30,000 sq ft. 73% of leads covered projects over 5,000 sq ft.  The increase in lead projects between 2,000 sq ft and 4,999 sq ft can be attributed to the number of SME’s facing 2013 and 2014 lease ends and those launching searches for additional and larger space as market conditions improve.

TOP TEN BUSINESS SECTORS – The Technology & Telecoms sector overtook Banking & Finance in 2013 as the strongest UK business sector in terms of relocation and refurbishment projects.   Lead numbers within this sector have grown year on year since 2009, making up 11% of all leads researched last year. If coupled with the Media sector under the popular designation of ‘TMT’, these two sectors were responsible for 32% of the top ten. The largest new technology office requirements were centered on London and the Thames Valley, with a few notable new searches emerging in Cambridge and Edinburgh.

The Banking & Finance sector was pushed into second place last year, but still had a strong showing, on par with 2012 lead levels. Relocation and refurbishment leads on hedge funds and investment firms made up 33% of the sector total. 

Law firm leads saw a 23.5% increase when compared to 2012 lead numbers and we expect increased activity in this sector during 2014. The recently published Metropolis Law Report confirms we are tracking 140 active  law firm office requirements totaling 2.6m sq ft plus over 100 law firms with lease expiries or breaks coming up between 2014 and 2016.

(C) Metropolis Property Research Ltd 2014

Central London Development Update

Keep calm and carry on refurbishing (Oct 2013, abridged)

Metropolis has just completed its bi-annual survey of the central London office development market. In the last six months work has begun on 35 office schemes in the main London office districts, accounting for a further 3.3m sq ft of offices under construction. In the same period 2.7m sq ft of office space was completed in 32 developments. In total there is now 10.4m sq ft of offices underway in central London in 77 schemes.

Amongst the major new starts are Crown Estate’s 140,000 sq ft 169-183 Regent Street scheme in W1, Mitsui Fudosan’s 168,000 sq ft 70 Mark Lane and Land Securities’ 375,000 sq ft 30 Old Bailey, EC4.

However, the office construction market continues to be dominated by refurbishment starts, with 24 out of 35 (68%) of the new starts in the last few months being substantial refurbishments. These include projects such as 180 Wardour Street, W1; 1 Aldermanbury Square, EC2; Bush House, WC2 and 1-2 Welbeck Street, W1.

Major schemes currently at site preparation stage and expected to start in 2014 total over 5m sq ft, including Land Securities’ 1 New Square, EC4: Oxford Properties’ 500,000 sq ft London Wall Place, EC2 and Great Portland Estate’s 12-14 New Fetter Lane, EC4 which has been pre-let.

More pre-lets stoke the fire

In terms of pre-lets, recent signings have injected more pace into the market. Some 3.2m sq ft of space within current schemes under construction has been pre-let already.

There is some 600,000 sq ft of office space in newly-completed and under construction buildings under offer, for deals expected to complete in the fourth quarter of 2013. The TMT sector remains strong accounting for up to 30% of deals.

The rise in demand for office space is causing some occupiers to be pushed out of core West End locations to take space in schemes in surrounding areas including North of Oxford Street, Soho and Midtown.

In conclusion, development starts and completions in central London are climbing, with early marketed space (12 months from completion) rising to 5m sq ft, from 4m sq ft a year ago. However, it is important to note that that the largest uplift in letting activity has been in the secondhand, rather than the grade A new space category, as the majority of occupiers continue to show caution with relocation decisions.

It is likely that much of the space currently under construction will be let after completion rather than pre-let, a view supported by the recent raft of deals at the 2010-completed Walbrook Building in EC4.

 

(C) Metropolis Property Research Ltd 2013

Mayfair scheme underway

Terrace Hill is underway with the redevelopment of 49-51 Conduit Street and 24-24A Savile Row, Mayfair, London, W1.  McLaren Construction is main contractor. The designer is EPR Architects and the scheme consists of a 3,943 sq m (42,437 sq ft) building including 3,096 sq m (33,320 sq ft) of offices, plus retail space.

(C) CityOffices.net 2013, www.cityoffices.net

City Scheme Start

Oxford Properties and Brookfield have begun work on London Wall Place (St Alphage House), at 2 Fore Street, London, EC2. There is consent for two office blocks: 121 London Wall is planned as 28,865 sq m (310,700 sq ft) and 123 London Wall as a 17,407 sq m (187,374 sq ft) block. The buildings are up to 16 storeys. The £350m scheme has been designed by Make Architects.  GM Real Estate and Jones Lang LaSalle are letting agents.

(C) CityOffices.net 2013, www.cityoffices.net