Overview of London’s Commercial Property Market – 2nd Quarter 2015

During the second quarter of 2015, we have seen a continuation of the market trends that characterised the first quarter of the year. Overall, the London commercial property market has experienced sustained rental growth in most sub-markets, but particularly in the West End. Researchers attribute continued rental growth to the healthy levels of leasing activity and to the rather reduced supply of Grade A space, and they affirm that increasing rental prices will be the predominant theme in the city’s commercial property market for the rest of the year.

This trend is particularly evident in the London office market. According to PropertyWeek.com, supply shortages in the city’s office stock are becoming “serious” and total supply dropped by 4 per cent between January and May 2015.

The London office market Q2 2015

Rising prices are the main theme in areas like Shoreditch, Clerkenwell, and Southbank. This trend is contributing to reduce the office cost disparities that have characterised the city core market for years. It is expected that price gaps across postcodes will be further reduced as these sub-markets become more consolidated. Another sub-market that has greatly benefited from strong demand is Hammersmith. Property Week has reported that this office sub-market is becoming a highly-sought after location that has gone from being a peripheral market to an extension of the West End. Similarly, those areas of the Thames Valley that are closer to the city have witnessed a noticeable surge in demand. This increase in demand is most likely caused by the improved transport links that will become a reality thanks to the Crossrail project. According to Colliers International, by the end of this year the office market in this area is expected to grow by 13 per cent.

Demand for serviced offices in London has experienced further growth during the past quarter. The number of serviced office space in central London has grown by 11 per cent so far, and growth is even more impressive in areas like the Southbank, where growth levels are around 17 per cent. In fact, Property Week reports that this sub-sector has outperformed all other market sectors not only in London, but also nationwide.

As far as new office developments are concerned, the most noteworthy deal closed during the second quarter of the year involves the agreement signed by Brookfield Mutiplex. This US-based firm has agreed to develop a £1 billion office complex in what will be London’s biggest skyscraper. The building will be located at 100 Bishopsgate, and once completed it will add 900,000 square feet to the city’s office stock. Other important projects in the city’s development pipeline include 5 Broadgate (700,000 square feet), 1 Bank Street (nearly 670,000 square feet), and 1 Angel Court (300,000 square feet). Continue reading “Overview of London’s Commercial Property Market – 2nd Quarter 2015”

A Guide to Company Relocation

Relocating an office or company to a different area or larger premises is an exciting prospect which can bring about new business relationships and increased opportunities. It can also be a lengthy and costly process, as well as a stressful moment in a company’s life for employers and employees. There are a range of considerations that must be considered when moving to a new office, from legal responsibilities to design and layout considerations to employee well-being and relations.

A successful move involves a lot of planning. Establishing requirements and priorities for a new location during the early planning stages will help inform decisions down the road. It will also establish a vision or objective for the move that will guide the entire process. Engaging with affected parties such as employees and clients will also help ensure the appropriate site is selected. It will also help reduce confusion and anxiety that inevitably is associated with a move. As a result, communication with employees, clients and other stakeholders is crucial to ensure a seamless move.

Continue reading “A Guide to Company Relocation”

London Office Space 2015: Stratford

Stratford in East London continues to experience significant regeneration and expansion as a result of the 2012 Summer Olympics, which were centred around Queen Elizabeth Olympic Park. The district within the London Borough of Newham has seen a number of other projects bring new life to the area, including the multi-billion pound Westfield Stratford City shopping and commercial centre. The area’s relatively low rents are expected to continue to attract businesses from across sectors in the foreseeable future.

Stratford’s Economy

In recent years, Stratford has been the focal point for significant expansion and regeneration. High-profile projects have included the Queen Elizabeth Olympic Park, which includes a number of venues for the 2012 Olympic Games including the Olympic Stadium, the London Aquatics Centre, and the London Velopark. The Olympics also added approximately 3,500 new homes when the former Olympic Village was converted into the East Village development. Other projects on the Olympic Park site include 1,500 new homes as part of the East Wick and Sweetwater neighbourhoods, new facilities for University College London and the Victoria & Albert Museum, Loughborough University’s iCity tech campus, and 15 new office and residential buildings in the International Quarter. Developments close to Westfield Stratford City will also add some 5,000 new homes as well as office space, public spaces, schools and other facilities. Other redevelopment projects have included upgrades to Stratford Station and the new 150 High Street, Stratford residential tower. Continue reading “London Office Space 2015: Stratford”

London in top place as the world’s most expensive office market

The London office property market has cemented its position in top place among a host of prestigious global property markets for the third year running.Throughout 2014, several indicators suggested that the average cost of office floor space in the capital was rapidly rising. Take up rates rose consistently during 2014, and so did the level of transactions and the amount of office space under offer. This year, London has consolidated its position as the most expensive office market at international level, ahead of key global players like New York or Hong Kong. Take a look at the details behind the stellar performance of the London office property market.

London: The world’s most expensive location for office space

A recently released Cushman and Wakefield study entitled ‘Office Space Across the World’ published a comparison of rental costs between some of the world’s most desirable office locations, which in addition to London included New York, Hong Kong, Paris, Sydney, and Tokyo. London came in top place as the world’s most expensive office market for three consecutive years. Over the past year, average office rental values in the city have increased by 4.6 per cent. The cost of office floor space in London is still far from returning to pre-recession values, as it remains 13% per cent lower than its 2007 values, but market analysts predict that the current trends are here to stay. As the availability of office space continues to decline, prices will rise even further throughout 2015 and beyond.

The main reason behind this upward trend is the ever-shrinking gap between supply and demand. London’s reputation as a global business centre attracts both entrepreneurs and experienced business owners to the British capital, and the effect of unwavering demand on the commercial real estate market is obvious. In the West End, supply has been dwindling since 2007, and currently vacancy rates hover around 3 per cent. This has allowed landlords to rise prices accordingly, pushing average costs to a new record high of £1,681.40/ m2 per year. To put this figure into perspective, consider the average costs of prime office space in the world’s second and third most expensive locations. In Hong Kong, office space in the central business districts averages £1,173.54 / m2 per year, whereas in New York average costs are in the region of £833.53/ m2 per year. Increasing costs seem to be a global trend, since during the past year office rental values have grown by an average of 7 per cent across the major global office markets. Continue reading “London in top place as the world’s most expensive office market”

London Office Space 2015: Farringdon

Farringdon is strategically located just outside of the financial and economic hub of the City of London. Along with Clekenwell and Shoreditch, the area makes up the City Fringe North. It is one of two City fringe areas, with the other located to the east and comprising of Aldgate, Spitalfields, and Tower Hill.

Office Space in Farringdon

Farringdon refers to a historic area around Farringdon Station in the London Borough of Islington. Comprising of the wards of Farringdon Within and Farringdon Without, Farringdon is split between areas that once lay inside and outside the London Wall. Like many parts of London just north of the City, office space in Farringdon features warehouse and factory conversions. Sizes typically range from 1,500 to 5,000 square feet, according to property consulting firm Carter Jonas. The area often attracts media and creative industries looking for more affordable office space than traditional locations like Covent Garden, North Oxford Street, and Soho. The northern City fringe also attracts companies in the technology sector, particularly due to its close location to capital markets for tech companies in nearby Shoreditch and popular business incubator programmes in the area. Continue reading “London Office Space 2015: Farringdon”

Overview of London’s Commercial Property Market – 1st Quarter 2015

Following a year of exceptionally strong returns on commercial property, the London market has started 2015 dominated by optimistic rental growth prospects and by changing occupier trends.

According to market analysts at Savills, activity levels began to accelerate in February across all commercial sub-sectors, being consistent with the trends observed during the past six months. London’s established reputation as a global hub for businesses in the knowledge economy has brought about an increase in the amount of funding devoted to research and development (over £1.5 billion a year according to the most recent data). This fact has had a clear effect on the London commercial property market, which continues to provide support to new startups and relocating businesses. In turn, this has prompted changing occupier trends. Companies who operate in the knowledge-intensive sector have begun to look for properties beyond the Tech City and other areas that traditionally had a strong presence of media and knowledge companies (such as Soho and London Bridge). New clusters have emerged in Stratford, Tottenham, and New Cross. These areas increasingly cater to the property requirements of small and medium-sized businesses, which made up 47% of all transactions during the first quarter of the year. The current floor space supply is set at 6.7 million square feet and vacancy rates average 6.9 per cent. The top rents achieved during this quarter reached £70 per square foot.

Office market trends

Availability has come under pressure due to the large number of commercial-to-residential conversions and to the significant level of commercial property being held as long-term assets. This is particularly the case in high-value areas like St James or Mayfair, where up to 80 per cent of the office floor space is locked up by investors.

On the positive side, we can highlight the successful redevelopment of the King’s Cross – Euston corridor, also known as the Knowledge Quarter. Here, more than 350,000 square feet of commercial floor space have been taken up in a single transaction, the sub-lease of 6 Pancras Square. According to GVA Research, prime office properties in Camden and King’s Cross have experienced large increases in rental values, driving occupiers out and towards nearby locations like Clerkenwell and Shoreditch, where rents average £57.50/sq ft. Rents in Midtown range between £62.5 and £72.5/ sq ft. Continue reading “Overview of London’s Commercial Property Market – 1st Quarter 2015”

Company Relocation: Relocating People & Employees

When a company relocates to new business premises, they may also relocate their employees. From time to time, companies may also be required to relocate staff to other cities or countries. This might be the result of opening a new office or trying to meet operational requirements by having enough resources in different locations. Companies need to consider the rights of their employees when relocating people. At the same time, employees need to understand conditions of their employment contract when they are asked to move.

Whenever a company relocates, employers are responsible for ensuring the rights of their employees are respected. This includes respecting the terms of any mobility clause in an employee’s contract. A mobility clause outlines the conditions and limits when an employee must move. This clause normally allows companies to force their workers to move, in accordance to the terms outlined in the clause. Employers are not required to provide compensation for employees if they relocate, unless this is identified in the employment contract. Employers must ensure that any request to move is reasonable. For example, asking an employee to relocate outside of the UK with only one day’s notice or if the move would affect the employee’s children’s education would not be considered reasonable requests.

It is important for employees to fully understand their employment contract and mobility clause, if present. Any employee with a mobility clause in their contract must move at the request of their employer unless they prove that the request to relocate is unreasonable. If proven that the move is unreasonable, the clause may not apply and the employee can request alternative arrangements. Employees without a mobility clause have the option to choose whether or not they wish to move. Continue reading “Company Relocation: Relocating People & Employees”

London Office Space Growth Areas 2015: Whitechapel

In close proximity to London’s major financial district Bishopsgate, Whitechapel is quickly rising as a prominent spot for growing businesses. Alongside this excellent locale, Whitechapel is serviced by numerous travel links. Using these links – whether taking the one of the numerous bus lines that service the area or hopping on the underground – Liverpool Street is only 6 minutes travel, while Canary Wharf is only 20. Another advantage of the Whitechapel area is that, as it is approximately three and a half miles from the city centre, the majority of it is outside the congestion area.

The current position of London office space has reached a plateau after a period of growth following a stagnant period. Confidence in the London market remains at a comfortable high, despite the general referendum occurring in 2015. However, as construction rates begin to level off, West End rental rates have begun to rise significantly. As a result of this, many new and already established businesses look to areas of London which have been previously undiscovered – such as Whitechapel. Having transport services to the city centre and other business parks as easily found as those in Whitechapel makes this region an in-demand location. Continue reading “London Office Space Growth Areas 2015: Whitechapel”

London Office Space Growth Areas 2015: King’s Cross

Despite high political tensions in 2015 as general and mayoral elections loom – and particularly as the EU referendum comes ever closer – confidence in London as a commercial hub appears to remain stable. However, construction levels are slowly coming to a standstill as projects finish and no new ones begin, causing rental rates in the West End to begin rising significantly. As such, businesses looking for commercial property in London are beginning to broaden their horizons in terms of office markets.

London office space rates remained at a steady level in 2014, with investments totalling just under £20 billion being pumped into the sector. That being said, 2014 ended with some surprises as some of London’s ‘trophy assets’ were seen to change hands – for example the famous Gherkin, which was purchased last year by the Brazilian/New York dynasty Safra. Indeed, with rental prices continually on the increase, a second surprise was seen as some of the previously more obscure sub-markets of London began to billow with success. Continue reading “London Office Space Growth Areas 2015: King’s Cross”

London Commercial Property Conferences, Events and Meetups for 2015

There is a wealth of opportunities to learn about London’s property market through conferences and other forums in the capital. These gatherings bring together practitioners, policy and decision makers, investors and others. They are opportunities to network and build relationships, while also making deals with new partners and investors.

The RICS Commercial Property Conference on 27 November 2015 provides market insight through keynotes and panels. The second edition of the conference is also an opportunity to debate macro triggers that impact property market growth. In 2014, speakers included GVA Chief Executive Rob Bould, real estate columnist Peter Bill, Legal & General Property Managing Director Bill Hughes, and Union Investment Real Estate’s Head of Investment Management International Martin Brühl. Other speakers represented leaders in the market, including Deutsche Bank, Segro, DTZ, Grosvenor and more.

The Royal Institution of Chartered Surveyors (RICS) stages a variety of conferences, seminars and workshops in London each year. Established by Royal Charter, RICS accredits some 118,000 professionals around the world. More than 50 RICS conferences and seminars are scheduled in London throughout 2015, including events that delve into dispute resolution, construction regulations, contract negotiation, and more. RICS will also organise the RICS Building Surveying Conference on 23 April 2015, the RICS Property Leaders’ Summit on 5 June 2015, and the RICS Residential Conference on 2 July 2015. To learn more about RICS conferences and other events in 2015, visit www.rics.org/uk/training-events. Continue reading “London Commercial Property Conferences, Events and Meetups for 2015”