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Office demand surges in the City of London
Occupier demand for office space in the City of London has reached its highest level since 2000 as firms from outside the financial services sector compete for space in the Square Mile. Office take-up in the City increased from 2.2 million square feet in the second quarter of the year to three million in the third quarter, a rise of 39%, according to the latest report from Knight Frank. Demand for office space has not been above this level since the third quarter of 2000 and is nearly double the long term average of 1.7 million square feet. This has included large deals for firms such as Amazon, and London Business School. ‘I see this as evidence of the Manhattan-isation of the City office market, where finance is now one of several sources of office demand now the square mile’s economy has drawn in a variety of new industries, as is the case in New York’s key office markets,’ said Dan Gaunt, head of City Agency at Knight Frank. Based on nine months data in the year so far, the City has seen 6.9 million square feet of office space acquired, compared to 5.8 million square feet for the whole of 2012. Occupier demand has come from a variety of industries, including those that in the past were not associated with the City, as shown by large pre-lets by Amazon at Principal Place of 431,000 square feet and M & G Investments with 330,000 square feet at 10 Fenchurch Avenue. Amazon also took 86,000 square feet at Leadenhall Court, while the London Business School acquired 88,000 square feet at 40 Tower Hill. According to Bradley Baker, head of central London tenant representation at Knight Frank, occupier confidence has strengthened recently which has translated into increased market activity. ‘We expect this to continue into 2015 as well advised businesses look to secure high quality space ahead of anticipated rental growth,’ he said. Supply of offices in the City fell during the third quarter and now totals 8.7 million square feet which is well below its financial crisis peak of 13.4 million square feet in the second quarter of 2009. This represents a current vacancy rate of 7.3%, the lowest level since the third quarter of 2007 around the time queues were found outside branches of Northern Rock bank at the start of the last downturn and below the long term average of 9.2%. ‘City landlords face the challenge of delivering an environment where both a corporate law firm and a technology company may be sharing the same office building, with issues of ensuring branding and the décor of common areas are acceptable to two very different tenants,’ explained Gaunt. | ‘Equally, the two tenants may in the future converge in their attitudes to offices and indeed corporate appearances,’ he added. Continue reading
Australia’s office market recovers with strong growth in 3,000 square meter sector
Strong demand for 3,000 square meter plus office space is driving healthy activity and growth across Australia’s office sector as the market looks towards 2015, according to new figures. The Colliers International Office Demand Index quarter three report has recorded a 51% increase in enquiry for office space nationally at 626,237square meters, compared to the September 2013 quarter figure of 413,538 square meters. According to Simon Hunt, Colliers International managing director of Office Leasing, the growth in office demand, a barometer for the state of the market, was being driven by enquiries within the 3,000 square meter plus market, which increased 126% from only 147,301 square meters in the September 2013 quarter to 332,500 square meters this year. Some 47% of all enquiries recorded for September year to date was for 3,000 square meters or more. Breaking the figures down further shows the greatest spike in demand for office was in Sydney where space enquired for more than doubled from 102,486 square meters in the third quarter of 2013 to 235,660 square meters in the third quarter of 2014, an increase of 130%. ‘These Sydney numbers have been driven by a significant rise in demand for office space in the above 3,000 square meter market where only 29,601 square meter was enquired for in the third quarter of 2013 compared to 114,800 square meters in the third quarter of this year,’ said Hunt. Demand for office space also doubled in Canberra, with 112,600 square meters in the third quarter of 2014 compared to 58,090 square meters in the third quarter of 2013, again driven by enquiry in the 3,000 square meter plus market. The Office Demand Index also recorded positive signs of increases in demand in Adelaide, up from 29,251 square meters in the third quarter of 2013 to 49,920 in the third meter of 2014 and Brisbane, which rose, quarter on quarter, from 47,095 square meters to 53,687square meters. Enquiry in Melbourne was down from 166,785 square meters in the third quarter of 2013 to 150,851 square meters in the third quarter of 2014, primarily driven by increased activity at the smaller end of the market, where 65,063 square meters was recorded in the under 1,000 square meter market in the third quarter of 2013 compared to only 51,001 square meters In the third quarter of 2014. The over 3,000 square meter market, however, saw an increase from 53,500 square meters in the third quarter of 2013 to 61,700 square meters in the third quarter of 2014. Hunt said the growing enquiry levels nationally for space over 3,000 square meters pointed to a strong period of business expansion driven by white collar employment growth in the corporate sector. White collar employment growth was set to be strongest in the Financial Services, IT, Communications and Healthcare sectors, with national forecasts indicating that over 10,000 new jobs would be created in these sectors in 2015. It was anticipated that the mining, government and manufacturing sectors would have slightly weaker… Continue reading
Advertised rents growth varies considerably in the UK
The South East of England, East Anglia and Scotland have seen advertised residential rents reach record highs in the third quarter of 2014, according to the latest published index. Overall across the UK, advertised rents increased by £66 per month in a yearly comparison to reach £1,034 per month, the data from Move With Us shows. In the South East and East Anglia they reached the highest recorded levels in at £1,254 and £947 per month, increasing by £18 and £11 each month respectively and Scotland also continued to be a strong performing region, with average rents hitting record levels of £727 per month. The firm said that, as with the second quarter of the year, the average national rent has been significantly influenced by a burgeoning London market. The average advertised rent in London increased by £118 in the quarter to reach £2,452 per month, some £230 higher than it was during the same period in 2013. In northern regions of England, however, rents have fallen gradually across the board with Yorkshire and Humber seeing price reductions of over £20 per month. ‘There is a stark contrast between the South and North of England as the divide between the cost of renting increases,’ said Robin King, director of Move With Us. For example, in Yorkshire and Humber the average rent is only £4 per month higher in a yearly comparison but in the South East this figure is significantly higher at £112 per month. North of the border, in Scotland, landlords have benefited from a significant rise in the average advertised rental price. ‘Annual growth is always good news for landlords but those in regions where we are not seeing huge amounts of growth shouldn’t be too concerned as we approach the end of the year. January is likely to bring a new influx of potential renters to the market who are looking to move in the New Year,’ he added. A regional breakdown shows that the average rental price in London is more expensive than in the summer high of 2012 when the London Olympics artificially inflated asking rents. Rents are continuing on an upward trajectory which is likely to continue into 2015. The quarter ended with the average advertised rent at £2,452 per month. Average rents in the South West have grown steadily throughout 2014, however, rents have fluctuated week to week while never falling below an average of £800 per month. In the third quarter the market improved marginally in July before dipping £3 or 0.4% in August and September. The average advertised rent is the region is £33 or 4.28% up in a yearly comparison at £813 per month. While the average rent seems set to continue to grow over the next year, it’s likely that minor fluctuations will persist, according to the index report. The South East is the strongest performing region outside of London and the average advertised rents have grown steadily over the past two years. In the last year, rents have… Continue reading
