The 6 Biggest Office Requirements To Watch In London
“I think we’ll see vacancy rates peak fairly shortly, and they’re going to peak at a lower level compared to previous cycles.”
Like many in the Central London office market, Brookfield head of London leasing Martin Wallace is more sanguine than one might expect given the mood music around Brexit.
In spite of the lack of clarity over Brexit strategy from the government and a pickup in the number of financial services firms moving jobs from London, Central London leasing figures have been robust this year. Take up was 5.5M SF in the first half of the year, according to Savills, 23% higher than the 10-year average.
Those active say that even though demand is not stellar, it is being met by very limited supply. Deloitte’s London Office Crane Survey for summer 2017 said construction of new office space is peaking in 2017 before dropping back in 2018 and 2019.
“It’s a steady market,” Wallace said. “There isn’t a lot being built, and a lot of what is has been pre-committed. Demand and supply are well balanced.”
“There’s pretty limited supply out there now and no new space creation,” Helical Bar Chief Executive Gerald Kaye said. “People are getting on with it while the politicians squabble about Brexit.”
Which companies have the biggest requirements for space in Central London, and where might they be heading?
Citigroup has appointed Cushman & Wakefield to find it 700K SF in a move that has some puzzling elements. It is currently housed in the 1.2M SF 25 Canada Square, and is already subleasing around 350K SF of this space. It has more than 20 years to run on its lease, which rises in line with inflation each year, meaning breaking the lease would be expensive. It is likely that, as with Deutsche Bank’s recent move, any relocation by Citi could be some years in the making.
European Bank of Reconstruction and Development
This bank was subject to reports last year that, along with bodies like the European Medicines Agency, it may be forced to move to the Continent because of Brexit. However, in spite of its name, the European Bank of Reconstruction and Development is international, not European, and so can base itself anywhere it pleases. It has appointed BNP Paribas Real Estate to find it 350K SF for when its lease ends at One Exchange Square in the City in 2022.
Sumitomo Mitsui Banking Corp.
In a sign that overseas banks are still willing to take space in London, Japan’s Sumitomo Mitsui Banking Corp. is on the verge of signing for 200K SF at 100 Liverpool St., part of the Broadgate complex in the City of London owned by British Land and GIC. It would be a consolidation of two existing offices.
L’Oréal postponed its search for a London HQ in the wake of Brexit, but earlier this year revived its search for 150K to 200K SF, in a move that would be an expansion from the 105K SF it occupies at 255 Hammersmith Road. It is likely to stay out of the City and West End and look at Battersea, Kings Cross, White City and other emerging areas, advised by Cushman.
Boston Consulting Group
Boston Consulting Group is looking to significantly expand its footprint in London. The 150K SF it is close to pre-leasing at Derwent London’s 80 Charlotte St. in Fitzrovia is more than triple the amount of space it currently occupies. It would mean the scheme is close to being fully let ahead of completion.
U.S. law firm Sidley Austin is close to taking 120K to 150K SF in the City and has narrowed its search down to two buildings: TH Real Estate’s 70 St. Mary Axe and Axa’s 22 Bishopsgate. It would be a first letting for either scheme, the latter of which is being built speculatively. Insurance firm Aspen Re is also reportedly in talks to take 50K SF in the 1.3M SF scheme.
Hear all about the London office market at Bisnow's London's Big Office Bash, 27 September.