Q4 2019

THE OCCUPIER

THE LONDON COMMERCIAL REAL ESTATE MARKET UPDATE

2020 PREDICTIONS ‘Be switched on in 2020’ 2 3

THE OCCUPIER - Q4 2019 2020 PREDICTIONS

WHAT’S INSIDE CONTENTS 2020 PREDICTIONS

Welcome to the latest edition of The Occupier 2019 LONDON OFFICE MARKET OVERVIEW In this edition, following the success of in matching requirements will hinder Central London tenant demand 04 our predicting skills in 2019 (9 out of 10), those businesses navigating the current the team here at DeVono Cresa bring you real estate market. Which sector let office space in 2019? 08 10 predictions that could influence the Office availability – What a difference a year makes 09 real estate market and decision-making We also showcase our recent work Rental pressure 11 in 2020. with the children and young people’s DeVono Cresa office availability opportunities 13 mental health charity, YoungMinds. We What seems like a hangover from 2019, discuss their search for its new HQ and Central London office rent guide 14 political and economic uncertainty subsequent design and fit-out by our in- continues to bubble away, causing a house design and build studio, Dthree. headache for businesses up and down 2020 PREDICTIONS the country. Despite Brexit having Please do get in touch if you have any feedback on this edition or suggestions occured, the rollercoaster ride looks set to 1 The merry-go-round of politics continues to impact decision making 16 continue as international trade becomes for the future. 2 London office rental growth to intensify in 2020 18 the next point of debate. Meanwhile, 2020 is expected to be the year in which 3 The tenant experience to take centre stage 19 many people will demand action to be 4 The green agenda set to influence tenant decisions 20 taken against climate change, prompting 5 A regional ‘office’ renaissance 22 businesses of all sizes to take steps 6 Tech in the workplace - where next? 23 in order to make a difference. Yet, it is the tenant experience that dominates 7 The ripple effect - the next generation of office markets 24 our predictions. The competition to 8 Evolution or revolution of the serviced office market? 26 win tenants is high, but the service, 9 Putting the service back into serviced offices 27 relationships and ultimate experience can Also available online at 10 Increasing demand for last mile logistics 29 often be low. 2020 could well be the year www.devonocresa.com/subscribe-occupier/ of where attention is shone on the tenant! Shaun Dawson, Head of Insights, DeVono Cresa

As our first report following the year- [email protected] Young Minds: Designing a collaborative space with Dthree 30 end, we take this opportunity to review 020 7451 1321 DeVono Cresa Group - 2019 year in review 34 the London office market in 2019, and www.devonocresa.com what a year it was. Tenant demand for About the DeVono Cresa Group 35

office space was high, the squeeze on Q4 2019 availability is a little bit tighter, both of which mean the shifting dynamics will THE OCCUPIER THE LONDON COMMERCIAL REAL ESTATE MARKET UPDATE

2020 PREDICTIONS indeed impact the market for the year ‘Be Switched on in 2020’ ahead. An increase in rents and difficulty 4 5

THE OCCUPIER - Q4 2019 MARKET OVERVIEW

sector was 4,730 sq ft, 53% down on the On face value, the tightening of the which are at play and we believe are long-term average of 8,900 sq ft. Likewise, average deal size could indicate a less playing a greater role include the increase 2019 LONDON OFFICE the average space taken by the technology than favourable leasing trend, yet it is in the use of technology in the workplace, sector has also narrowed, albeit by just 11% worth reiterating that the number of firms introduction of more agile working to 8,370 sq ft. The dominant financial sector taking space in 2019 has increased. The practices, or even moving certain functions MARKET REVIEW has also been leasing less space at 10,300 smaller average footprints could for some out of London. These are all impacting 2019 was a significant year for the London office market, a year in which corporate uncertainty sq ft, which represents an 8% drop on the have been influenced by the political and leasing requirements and ultimately long-term average. economic uncertainty. Yet other factors decisions. remained high. Despite this, businesses continued to commit to London office space. Here is our review of the year. SUPER SIZED DEALS ARE STILL HERE HIGH PERFORMANCE IN 2019 The frequency of super-sized deals (over enact wider business transformation. Close invariably the buildings that are leased are The London office leasing market has once CENTRAL LONDON OFFICE MARKET: 100,000 sq ft) have remained relatively by in the City the technology giant, Apple has new developments and to achieve tenants space let during 2019 reaching 14.9 million LEASING ACTIVITY BY QUARTER 2014-19 high in 2019 with 13 lettings totalling 2.3 leased approximately 156,000 sq ft at of the calibre of Sony and Diageo, it gives a 16 sq ft. This not only represents an increase on million sq ft. This is compared to 17 such London’s newest skyscraper, 22 Bishopsgate. boost and drive that a scheme sometimes needs. the previous year 14 deals in the previous year, the volume of This is in addition to their 2016 letting of and an increase SPACE LET IN which equated to 2.9 million sq ft. 465,000 sq ft at Battersea Power Station, The impact of pre-letting (or early-letting) 12 on the long-term 2019 REACHED where the firm is expected to move in of new schemes, whether by a super-sized 10 annual average t Notable deals include BT’s pre-let of 1 during 2021. or mid-sized deal is now filtering through

sq f (3% and 27% 8 Braham Street, taking the entire office to tenant choice. Such deals accounted for

Million respectively), but 14.9M space of 328,065 sq ft. This transaction The super-sized deals should not be viewed 3.4 million sq ft in 2019. The third year in 6 more importantly, SQ FT marks a significant shift for BT, who have as just another corporate relocating, but a row of above average level of pre-letting it highlights a 4 resided at their current address opposite as market shifters. These firms create (2.1 m sq ft). This is leading firms of all sizes level of confidence that businesses continue St Paul’s for close to 35 years. The move 2 ecosystems with like-minded companies and all sectors to commence their property 2 to have by securing an office footprint in the miles east will provide a catalyst for greater from local amenities through to other searches earlier, which is applying pressure capital. - staff engagement on the new space and occupiers wanting to be in proximity. Also, on the upcoming supply pipeline. 2014 2015 2016 2017 2018 2019

Q1 Q2 Q3 Q4 10-yr annual average Our latest research shows that a final push LARGEST LEASING DEALS IN 2019 in leasing before the year was out resulted in 3.9 million sq ft of office space being let across Q4. Whilst this figure is shy of the previous quarter, it is the third highest quarterly COMPANY BUSINESS SECTOR BUILDING MARKET SIZE (SQ FT) total in the past five years. This could suggest that businesses have set aside their uncertainties on the political and economic situation. European Bank for Reconstruction and Financial 1 Bank Street Docklands 360,000 However, in practice caution is very much prevalent when real estate decisions are taken. Development BT Group Plc Telecoms 1 Braham Street East Fringe 328,000 SPACE CONTRACTION WeWork Serviced Offices 25 Churchill Place Docklands 287,415 OR BETTER USE Uncommon Serviced Offices 81-87 High Holborn Midtown 186,280 Apple Technology 22 Bishopsgate City 156,440 Further analysis of our data shows that the commitment, it does show that the average Facebook Technology 10 Brock Street West End 145,000 number of occupiers committing to space size of space leased across the year has OCCUPIERS Diageo plc Corporate 14-18 Great Marlborough Street West End 129,245 rose to 577 in Q4, the highest number of contracted to 7,700 sq ft. This equates to an Sony Music Media S1 Handyside Street West End 124,600 businesses leasing space in a single quarter 8% reduction on the average deal size in IN Q4 in over 15 years. This surpasses the most 2018 and sinking below the 8,000 sq ft for Monzo Bank Limited Financial 5 Appold Street City 122,320 577 Brewin Dolphin Limited Financial 25 Cannon Street City 116,110 recent high of 536 in Q1 2011. Whilst this the first time since 2012. (the highest number in 15 years) is another encouraging sign of business The decline in the average GRADE A MOMENTUM WEST CENTRAL MIDTOWN SOUTHBANK CITY DOCKLANDS size becomes more acute END LONDON when reviewing the various Whether it is existing, under construction, total volume of take-up across central Average deal size, refurbishment or even proposed schemes, 5,910 6,500 4,500 8,800 26,860 7,700 business sectors who have London, this is not just up on the previous 2019 (sq ft) M leased space in 2019. In the leasing momentum for best quality year, but it also surpasses the long-term 7.3 Long-term average, 6,030 7,255 8,300 10,650 21,600 7,900 particular, the average size stock has continued throughout 2019. annual average of 43%. Accounting for 7.3 sq ft of Grade A space 2009-18 (sq ft) of space let by the media Grade A space amounted to 49% of the million sq ft, this is the highest volume we transacted in 2019 6 7

THE OCCUPIER - Q4 2019 MARKET OVERVIEW

CENTRAL LONDON OFFICE MARKET: LEASING SHARE BY GRADE new space, second-hand is still the most welcome well-known brands such as Apple to commence construction back in 2016, a transacted. At 7.6 million sq ft in 2019, this and Nasdaq. Other recent tenants to sign ‘nervy’ time for developers, is proving now 2019 LETTING ACTIVITY represents the highest volume of this grade up include US law firm Cooley, insurers to be a gamble well played by delivering leased since 2014. Verisk and meeting/event space provider into a resilient market. Convene. One of the largest developments

“Second-hand space MOVING EAST IN THE WEST END STEADY PACE IN MIDTOWN 3.8M SF at highest level In the West End, letting activity in 2019 Office leasing across the Midtown market IN THE WEST END PRE/EARLY-LET GRADE A SECOND HAND totalled 3.8 million sq ft - down by 7% on in 2019 fell to 1.8 million sq ft, down by 6% 7% leased since 2014” the previous high level of 2018. Whilst not compared with the 2018 total, which itself 23% 26% 51% pushing the needle further like the City, was down on the previous year. Despite the The label second-hand is an industry term, the West End office market is comfortably decrease in 2019, the market is keeping have recorded in our data series. letting of Grade A space, tenants continue one which can sometimes be a disservice above the long-term annual average of 3.2 a steady pace as it remains above the to be able to secure this level of Grade to the wide range of office space that million sq ft. long-term annual average of 1.6 million This is a level which not only suggests A space. The question is will momentum is encompassed in this category. At the sq ft. Notable transactions stem from 1.8M SF that tenants increasingly favour the quality continue, and is there enough space out top end of this range, the quality is not The North of Oxford Street submarket the serviced office providers. It appears spaces, it also shows that the profile of there for 2020? too dissimilar to that of Grade A – this is has recorded the most activity in 2019, Midtown was the target last year to IN MIDTOWN office stock across London has changed. increasingly being reflected in the rental accounting for 19% of the total West End increase coverage as the sector accounted 6% Despite three years of above average It’s not all about the brand spanking level being quoted. take-up. This signifies a shift in the centre for 28% of the leasing. One notable deal of gravity for leasing in this market, where was by the operator Uncommon who took in 2018 the Victoria submarket topped the 186,000 sq ft on High Holborn. THE CITY, THE TENANTS CHOICE list with a 22% share. In fact, areas such Leasing in the City has once again as King’s Cross and The Professional achieved a new high-water mark, CENTRAL LONDON OFFICE MARKET: Paddington have sector are the second the total amount of office space let LEASING SHARE BY MARKET, 2019 (%) equally seen a demotion “Shift in the centre biggest sector taking in 2019 reached 6.4 million sq ft, in the share of leasing, of gravity for leasing office space in shifting out by 3% on the previous down to 12% and Midtown, including 643K SF 5% respectively. DeVono Cresa client high of 2018. This represents 43% of Docklands in the West End” IN SOUTHBANK IN 2019 all take-up across central London. Yet Midtown The reduction in Deloitte LLP who surprisingly, the number of businesses 12% availability levels have acquired 76,200 who took this space has increased 8% and a limited list of schemes in which to sq ft in 66 Shoe Lane. The deal sees the East Fringe pre-let have both influenced the location development scheme become fully let by significantly by 25% (on 2018) to 731 West End 6% of leasing. Not all West End submarkets Deloitte having already pre-let the upper firms. We believe that the number of 25% have recorded a drop in activity – Soho, St floors in 2018. active firms is a good barometer to the Southbank 4% James’s and Knightsbridge have all seen its 6.4M SF health of the market, and like the new North fringe volume of let space increase in 2019. buildings in the City – this number has 1% IN THE CITY kept on rising in recent years! Not only West Fringe 3% boosting the office population but also 0.1% TENANTS DOCKING IN increasing the diversity of businesses, DOCKLANDS with a growing cohort of tech firms City and educational institutions now 43% Total: The Docklands office market experiences The European Bank of Reconstruction & calling the City home. extreme highs and lows in letting activity Development took 360,000 sq ft on Bank HIGHEST LEVEL SQ FT from one year to the next. 2019 is one of Street in the first half of the year. After the 14.9M OF LETTING IN those high years with 1.26 million sq ft and summer, WeWork acquired 287,000 sq ft at Grade A space in the City office market DOCKLANDS continues to be a huge draw for is the highest level of leasing since 2008. 25 Churchill Place, taking the space that the tenants, with 56% of space taken being historic high set in 2018 but remains latest figures with close to 550,000 sq ft in Albeit this record is by a whisker (4%) as European Medicines Agency had to vacate SINCE 2008 of the best quality. This also includes space above the long-term annual average by 2019. The soon-to-complete development 2016 was 1.21 million sq ft. Nevertheless, following the relocation to Amsterdam as a that is under construction or refurbishment, half. Lettings in 22 Bishopsgate in what is dubbed a ‘vertical village’ for its plethora leasing in and around the wharf has been result of Brexit. which at 1.4 million sq ft is down on the the City’s tallest building have buoyed the of amenities throughout the building, will robust, largely due to two super-sized deals. 1.3M SF 8 9

THE OCCUPIER - Q4 2019 MARKET OVERVIEW WHICH SECTOR LET WHAT A DIFFERENCE OFFICE SPACE IN 2019? A YEAR MAKES

FINANCIAL FOOTPRINT space at a fast pace. The quest for ultimate Whilst this is not indicative of technology AVAILABILITY LEVELS TIGHTEN CENTRAL LONDON OFFICE MARKET: AVAILABILITY 2014-19 coverage has seen them account for 17% of firms snubbing London as an office The Financial sector has cemented its take-up in 2019. Placing them ahead of the location, it does beg the question, where Office availability across central London 17 technology sector in terms of market share. are all the tech workers going. Though fell by 14% over the course of 2019, to position as the most active for leasing 15 13.6 million sq ft. Now at its lowest level in 2019, with a 24% share. This level of technology firms have not increased their Despite the boardroom turmoil that beset since Q4 2016, representing an availability 13 activity is up from the 18% recorded in share of leasehold space in 2019, they may the flexible leasing giant WeWork in the well be opting for more flexible options. ratio of 5.5%. The culmination of three 2018 and just pips the long-term annual ftsq summer, the operator still leased years’ worth of robust demand has seen 11 average of 23%. In The technology sector has for a long an additional 29 sites adding time been a proponent of agile working the amount of available office space being Million previous editions 9 approximately 750,000 sq ft to chipped away at, more recently with the of The Occupier, we “Financial sector practices, this is potentially now translating their portfolio – albeit the majority volume of second-hand space. However, 7 have highlighted into reduced footprints. of these were in the first half the overall total could be interpreted as how the sector leasing up - with of 2019. Another operator who However, having said that the tech giants still being high, but when looking at the 5 has countered 24% share” 2014 2015 2016 2017 2018 2019 has notched up double figures is individual submarkets there is quite clearly the expectations have been active once again. Both Apple Knotel, taking 14 sites. Not quite a squeeze in some locations, one which Availability (m sq ft) 5-year annual average of downsizing and Facebook have both taken 100,000+ at the same volume as WeWork, will impact tenant choice over the course or even departure of firms as a result of sq ft spaces in 2019 and with Amazon but their leasing spree have significantly of 2020. Brexit. The latest data confirms this and reportedly on the hunt for more space in The availability of office space in the West greatest squeeze in availability levels with increased their coverage across London. in fact shows that the sector has further London we don’t expect the larger firms to End at the beginning of 2020 stood at falls of 26%, 36% and 41% respectively. Our data shows that the marketplace for In the City office market, 4.7 million sq entrenched its position. shy away from leasing in the future. 4.9% of the market, dipping below the 5% Of the eight submarkets that make up the ft was available at the end of 2019, a flexible leasing got that little bit more mark, which equates to West End, two have seen an increase in crowded in 2019, as 32 unique operators reduction of 17% The future of the financial industry in RECRUITERS SIGN UP 3.3 million sq ft. This space since the end of 2018 – King’s Cross leased space in 2019. More choice for over the course of the UK is still subject to negotiation and FOR MORE SPACE represents a decrease (16%) and Knightsbridge (24%). tenants, more competition for the providers. the year. Similarly, will be a key talking point in phase II of of available space by a A deeper dive into our data has highlighted this level is also 13.6M SQ FT Brexit. However, we should not forget that third since the recent As you have probably ascertained from an increase in the volume of office space at its lowest level financial businesses wishing to operate OF AVAILABILE peak in Q1 2018. Like the the availability narrative in the West End TECH FIRMS recruitment agencies have leased in 2019. since 2016. Our in a post-Brexit Britain may need a base general picture across and the City, other submarkets are equally Just over 260,000 sq ft was acquired by analysis shows SPACE IN 2019 here in the UK, akin to those who want to The technology sector is a key part of central London, it is the experiencing downward pressure on the 45 recruitment businesses, representing a that it is the drop in second-hand space operate in the EU. In doing so, they will be the London economy. Funding into the movement of second-hand space that has volume of available space. The Southbank 238% increase on the same period in 2018 that has significantly contributed to the joining a diverse range of firms who have sector in 2019 increased by 87% to $9.7 been mainly contributing. In one year, the and Docklands have both seen double- (down from 49 firms). Recruiters are in overall picture, now at 2.8 million sq ft leased space in London during 2019, from billion according to research by the level has dropped by 19%, leading to a digit drop in availability, with the latter expansion mode. representing a 50% difference to the end of the traditional to the new kids on the block, Mayor of London’s promotional agency further squeeze on the choice for tenants in now dipping just below the 2 million sq ft London & Partners. This 2018. Bucking the downward trend is the domestic and overseas, through to the An active jobs market and what was already a tightening market. level for the first time since Q2 2017. The increased investment into amount of Grade A space that is available, boutique and corporates. The likes of which employment at its highest Midtown market has seen a reduction from high growth businesses “32 unique having ticked upwards by 42% to 1.9 include Monzo Bank, Nationwide Building level since the 1970’s A deeper dive into the data shows that Q3 to Q4 by 8% to 2.0 million sq ft, yet over is helping to support million sq ft. Society, NIBC Bank NV and NASDAQ to operators leased makes for a competitive Soho, St James’s and Victoria have seen the 2019 the difference has just been 1%. Not firms from start-ups name a few. landscape for recruiters. all markets to established brands. space in 2019” Our research shows that have seen However, office leasing WEST END MIDTOWN SOUTHBANK CITY DOCKLANDS CENTRAL LONDON FLEXING THE REAL ESTATE businesses in this sector a decrease activity by technology firms MUSCLE have taken an average Availability and the (million sq ft) 3.3 2.0 0.8 4.7 1.9 13.6 in 2019 accounted for 13%, fringe Over the past few years, serviced office 5,772 sq ft – double the size of that was down from the 15% in 2018. In real terms % Change markets to providers have been snapping at the heels taken in 2018. Q4 2018 to -18% -1% -19% -17% -14% -14% the volume of space leased has stagnated. Q4 2019 the west, of traditional business sectors, scooping up north and 10 11

THE OCCUPIER - Q4 2019 MARKET OVERVIEW

east, and have all CENTRAL LONDON OFFICE MARKET: CHANGE IN NUMBER OF seen an increase on AVAILABILITIES BY SIZE RANGE, Q4 2018 - Q4 2019 the year – 11%, 8% RENTAL PRESSURE and 4% respectively. 100,000+ Prime rental growth across all central Old Street have both realised more growth CITY PRIME RENTS The reducing level of London submarkets amounted to an over the year – 3% and 7% respectively. 50,000-99,999 available office space average of 3% in 2019. This mirrors the Both of which have turned the dial higher UP TO same average growth rate as in 2018, and set new rental levels akin to those across the central 25,000-49,999 London market however the significant shift in the commanded in districts of the West End. has become more 10,000-24,999 dynamics of supply and demand is starting pronounced in 2019. to put upward pressure on rents, more Mayfair and St James’s continue to take PSF 5,000-9,999 £70 The total of 13.6 noticeable in the highly sought-after the top spot at £120.00 per sq ft, this locations. represents a 4 % increase over the year. million sq ft to many 0 - 4,999 people outside of the Other West End submarket movers include industry could seem -60% -40% -20% 0% 20% 40% 60% 80% Prime Grade A rents in the City East Grade A rents in King’s Cross/Euston submarket covering the Aldgate and St climbing by 3% to £80.00 per sqft and quite a lot and give % change the impression of a Katharine Docks area increased by 13% in Paddington also increasing by 3% to £77.50 market awash with space. However, most factor in the size requirement and the field who have current requirements for spaces 2019, to £65.00 per sq ft. This was the big per sq ft. Whilst prime Grade A rental businesses looking for space usually have of candidates contracts further. between 25,000 sq ft and 100,000 sq ft will biggest rental movement recorded in 2019. growth has been recorded in only 3 out a location in mind before any search. It is feel the squeeze more than others. Led by the delivery of new buildings to the of the 8 West End submarkets, we expect then that reality of the reduced number of The overall number of available spaces market, it is not expected to see such level this to change in 2020, as the volume of 3% available spaces becomes evident. Then surprisingly has not changed from Q4 2018 We have seen an increase of 9% in the of growth in 2020. Double-digit growth of available space continues to tighten. AVERAGE GROWTH IN to Q4 2019. What has number of spaces available sub-5,000 sq ft. 11% was recorded for Grade A rents in the Docklands market, now at £52.50 per sq ft. Both the Southbank and Midtown have GRADE A RENTS IN 2019 CENTRAL LONDON OFFICE MARKET: shifted is the number At the other end of the scale, 100,000+ sq ft Both these rental levels set new highs for seen prime Grade A rents step up by 4%, AVAILABILITY BY GRADE, Q4 2019 of spaces in different spaces have increased, yet despite the large size ranges. The average percentage movement this number has these areas. Whilst not a new high, prime and are now level pegged at £72.50 per UP % rents in the City core have nudged up to sq ft. Yet a dearth of available prime space 2 deal size in 2019 was only just broken into double figures. on 2018 7,700 sq ft and it is the £70.00 per sq ft. This is the first time since in these markets will see further pressure 5,000 - 9,999 sq ft range On average, 1,500 businesses lease 2017 that this level has been achieved. to increase in 2020, but equally should that has seen decline of space across central London each Elsewhere, in the City market the outer spur on developers to kick-start new Grade A 12%. However, it is the year, highlighting the intensity of the fringe areas of Clerkenwell/Farringdon and development. 29% larger size ranges that competition for space. Factor in another have seen the greatest 100 businesses who secure space ahead CENTRAL LONDON OFFICE SUBMARKETS: PRIME GRADE A RENTAL CHANGE, 2018-2019 declines, especially the of construction/refurbishment completion 50,000 - 99,999 sq ft adds further complexity for those tenants ALDGATE/ ST KATHERINES 13% range, which has seen with open requirements. There is no CANARY WHARF 11% SHOREDITCH | OLD STREET 7% the number of available indication that availability levels will MAYFAIR | ST JAMES'S 4% Secondhand spaces reduce by nearly increase significantly in 2020, in fact we LONDON BRIDGE | WATERLOO 4% 71% half in a year. Whilst the expect to see further reductions. With high MIDTOWN 4% PADDINGTON 3% number of spaces on the demand, and low supply another factor to EUSTON | KING'S CROSS 3% market fluctuates, our these dynamics is a shift in rental levels – CLERKENWELL | FARRINGDON 3% assessment of the data and not downwards! LIVERPOOL ST / BANK 2% HACKNEY| DALSTON indicates that tenants STRATFORD COVENT GARDEN CAMDEN SOHO VICTORIA AVERAGE DEAL SIZE IN 2019 KNIGHTSBRIDGE NORTH OF OXFORD ST 8% DOWN HAMMERSMITH -2% 7,700 SF on 2018 -4%-%- 2% 0% 2% 4% 6% 8% 10% 12% 14% 12 13

THE OCCUPIER - Q4 2019 MARKET OVERVIEW

CENTRAL LONDON OFFICE SUBMARKETS: There was a noticeable shift in prime PRIME GRADE A & B RENTS AND MARKET AVERAGE rental levels in 2019 with Grade B EXCLUSIVELY WITH £140.00 space. As highlighted in our Q3 edition of The Occupier. At year-end, Grade B £120.00 rents moved out on average by 2%, DEVONO CRESA AVAILABILITY with Midtown having the greatest rise As part of our full portfolio of services, DeVono Cresa has £100.00 of 13% to £65.00 per sq ft. a team dedicated to disposing of occupiers’ space. Here is a selection of the currently available disposals, across OPPORTUNITIES £80.00 In the West End, the traditional London’s most sought after locations. submarkets of Mayfair/St James’s, £60.00 North of Oxford Street, Soho and even 19,451 12,885 W1 4,779 £40.00 King’s Cross/Euston have ratcheted up ONE BARTHOLOMEW, EC1 SQ FT 20 WOOD STREET, EC2 SQ FT 35 PARK LANE, SQ FT 3-4% of Grade B rental growth. The £20.00 majority of submarkets are expected to succumb to more growth in the £- West End SouthbankCkC ityMyM idtown Docklands StratfordEdE ast London year ahead. As the pace of demand and volume of availability diverge, Grade A Grade B Average Grade B rent Average Grade A rent rental increases become inevitable.

RENT: Upon Application | RATES: £22.00 PSF | RENT: Upon Application | RATES: £29.00 PSF | PASSING RENT: £83.15 PSF | RATES: £48.57 PSF | 20:20 VISION FOR 2020 SERVICE CHARGE: £10.00 PSF SERVICE CHARGE: £12.00 PSF SERVICE CHARGE: £19.67 PSF

7,685 8,136 1,591 THE WALBROOK, EC4 SQ FT 1 ST MARTIN’S LE GRAND, EC1 SQ FT HARLING HOUSE, SE1 SQ FT

Since the results of the EU referendum Our research were announced in 2016 the start to a has shown new year has been viewed with much that apprehension by the business community. businesses Lack of clarity and direction of Brexit, across London the impact it would have on workers, the have been bottom line or even how far in the future more than RENT: £57.50 PSF | RATES: £21.66 PSF | PASSING RENT: £41.00 PSF | RATES: £19.20 PSF* | QUOTING RENT: £57.50 PSF | RATES: £14.38 PSF | could plans be made, impacted confidence resilient to SERVICE CHARGE: £10.96 PSF SERVICE CHARGE: £10.00 PSF SERVICE CHARGE: £9.52 PSF levels. This year the certainty is that Brexit the murkiness has now happened, but that does not spell of recent 7,302 the end to the process. The rest of 2020 politics, HARLEQUIN BUILDING, SE1 SQ FT To arrange a viewing or to discuss your lease will see the UK’s future relationship with with leasing levels above average for the tenants with a renewed level of confidence disposal requirements, contact David Barrington – Head of Disposals. the EU be the main discussion point. The past three years. We don’t expect to see will have their focus beyond 2020 or even conclusion of which will affect the way we the degree of interest in London offices 2021, commencing property searches at an Call 020 7451 1332, email [email protected] trade, work, travel, study, and reside with our to dissipate over the course of this year, earlier stage. Ramping up the competition or view the full disposals details and brochures at EU neighbours. but satisfying requirements in a supply for both current and future spaces, making devonocresa.com. constrained market will no doubt make it the navigation of the market a little trickier more difficult to secure the right space, at for tenants. the right time, at the right price. As such David Barrington UNDER OFFER Head of Disposals PASSING RENT: £53.40 PSF | RATES: £19.75 PSF | [email protected] SERVICE CHARGE: £10.49 PSF 14 15

THE OCCUPIER - Q4 2019 MARKET OVERVIEW

CENTRAL LONDON MIDTOWN CITY LEASEHOLD FLEXIBLE OFFICE LEASEHOLD FLEXIBLE OFFICE Q on Q Price per workstation Q on Q Price per workstation PRIME RENTS PSF Grade A Grade B PRIME RENTS PSF Grade A Grade B avg growth per month avg growth per month City Fringe West - Clerkenwell / Farringdon £82.50 £66.50 1% £450 - £875 OFFICE RENT GUIDE Covent Garden £82.50 £67.50 0% £550 - £875 City Fringe North - Old Street / Shoreditch £77.50 £60.00 2% £450 - £875 Midtown Core £72.50 £65.00 0% £500 - £850 Q4 2019 – Leasehold & Flexible City Core £70.00 £57.50 3% £400 - £1,000

City Fringe East - Aldgate / St Katharine Docks £65.00 £45.00 0% £475 - £975 Premium Tower Space - High / Mid Rise £87.50 £82.50 3% – WEST END

LEASEHOLD FLEXIBLE OFFICE

PRIME RENTS PSF Grade A Grade B Q on Q Price per workstation avg growth per month HACKNEY/ Mayfair / St James’s £120.00 £85.00 3% £750 - £1,500 CAMDEN LONDON FIELDS STRATFORD Soho £97.50 £75.00 0% £550 - £1,200

Knightsbridge £90.00 £62.50 0% £700 - £1,400 North of Oxford Street £85.00 £67.50 0% £500 - £950 EUSTON/ KING’S CROSS King’s Cross / Euston £80.00 £67.50 2% £650 - £1,000

Victoria £77.50 £67.50 2% £550 - £950 Paddington £77.50 £57.50 0% £650 - £850 EAST LONDON CITY FRINGE Camden £65.00 £52.50 3% £400 - £650 MIDTOWN CITY NORTH CORE FRINGE LEASEHOLD FLEXIBLE OFFICE NORTH OF WEST PRIME RENTS PSF Grade A Grade B Q on Q Price per workstation OXFORD STREET avg growth per month CITY FRINGE PADDINGTON EAST Stratford £45.00 £32.50 0% £250 - £660 CITY SOHO COVENT Hackney / London Fields £42.50 £32.50 0% £250 - £650 GARDEN CORE MAYFAIR WHITE WHITE CITY CITY ST JAMES’S

SOUTHBANK DOCKLANDS KNIGHTSBRIDGE

VICTORIA HAMMERSMITH

WEST LONDON VBE LEASEHOLD FLEXIBLE OFFICE DOCKLANDS PRIME RENTS PSF Grade A Grade B Q on Q Price per workstation avg growth per month LEASEHOLD FLEXIBLE OFFICE

Hammersmith £55.00 £45.00 1% £500 - £850 PRIME RENTS PSF Grade A Grade B Q on Q Price per workstation SOUTHBANK avg growth per month White City £52.50 £35.00 2% £500 - £850 Canary Wharf & Quays £52.50 £37.50 3% £450 - £850 LEASEHOLD FLEXIBLE OFFICE

PRIME RENTS PSF Grade A Grade B Q on Q Price per workstation avg growth per month

Data as at the end of January 2020. Southbank: London Bridge / Waterloo £72.50 £60.00 2% £500 - £950 Q-on-Q avg growth denotes general rental change from Q3 2019 to Q4 2019. Vauxhall / Nine Elms / Battersea £65.00 £40.00 0% £500 - £850 Serviced office rates are fully inclusive. Source: DeVono Cresa Insights 16 17

THE OCCUPIER - Q4 2019 2020 PREDICTIONS 2020 PREDICTIONS

A new year and a new decade – welcome to 2020. Political uncertainty, environmental concerns and rising costs are not the best way to start the year off. Nevertheless, these are significant factors that we expect to impact the office market.

Our set of predictions are wide ranging, but all could influence the real estate market and business decision-making in 2020.

THE MERRY-GO-ROUND The Coronavirus is one such issue, affecting inbox for any political or even business but also nationally and internationally. OF POLITICS CONTINUES TO global trade, travel and tourism. The rapid leader for 2020 is full and wide-ranging. The economic contribution of London 1 spread of the virus within China and the to the UK is vital. Ensuring that this is IMPACT DECISION MAKING subsequent health warning by the World FOUR MORE YEARS preserved through trade agreements and Health Organisation will have a significant future relationships around the world It’s election year in the US. President impact on the global economy. The last will be key for the next Mayor. On the Donald Trump is vying for his second term The latter part of 2019 became a watershed NEXT PHASE OF Yet, a trade agreement with the EU is one of such global health scare on this scale ground, supporting the growth of existing in office. Having recently avoided being moment for UK politics and Boris Johnson. many that the UK government is hoping to was the SARS epidemic, also originating and emerging business districts will be BREXIT & TRADE removed through impeachment, Trump will Since becoming Prime Minister in the secure in 2020. The US, the Commonwealth in China back in 2002. However, the important for London to compete with head into the 2020 elections galvanised. summer of 2019, Johnson had been unable The UK is currently in a period of transition and China are all on the list too, yet a dependency on Chinese manufacturing and other cities around the world and the UK. His win in 2016 resulted in a clear split to push through his Brexit proposals. A with the EU until the end of 2020, with backdrop of tense trade battles in 2019 products from mobile phones to clothing 2020 looks set to be an eventful year in the US population; expect this to rear division within parliament and between both sides hoping to reach an agreement will make for a less than smooth path. back then was considerably less than it is for economic growth. Here in the UK, its head once more. How a second win the two main political parties meant by that time. The negotations are expected Even though trade between the US and now. Containing the virus will be imperative businesses have so far navigated Brexit, will impact businesses here in the UK is proceedings had reached an impasse. A to cover all matters of trade, which touch China is normalising there are many more for global economic growth, but it will economic sluggishness and political not yet clear. As election season kicks into December general election was called, on parts of the economy as diverse as obstacles along the way, not least of all if come at a price. Not least of all in the UK upheaval, rather well. It seems whatever full swing, we will get a better measure with the Conservative Party winning an the financial sector and as emotive as the UK adopts Chinese 5G technology and with a reduced number of tourists and 2020 has in store, firms will prepare from his electioneering and rhetoric. as overwhelming mandate. After a three-year the fishing industry, to name just two. the arguments surrounding its suitability business events. accordingly. We do not expect business to the likelihood of a US-UK trade deal. journey and three Prime Ministers, the UK is Movement of people, services and goods from a security standpoint. However, should uncertainty levels to dissipate this year and Conversely, with no clear winner in the no longer a member of the European Union will be the backbone of the talks. However, the government be successful in achieving It is not just the recent virus outbreak that caution regarding real estate decisions will Democrat nominee race thus far, what a (EU). True to Boris Johnson’s slogan, ‘he got the short timeframe for such deliberations agreements with nations around the world, threatens people and businesses alike. The prevail. non-Trump presidency would look like is a Brexit done’. However, this does not signal are a cause for concern, and uncertainty it is expected to give the economy, albeit continued unrest in the Middle East and distant reality at this point. the end of the merry-go-round of politics, amongst businesses is expected to rise towards the end of the year, a boost into tensions between the US and Iran have the 2020 will see the government embark on again. Whilst our research shows that 2021. potential to escalate, which could further Whilst not on the same scale as the US Phase II – the trade talks and outlining of businesses have been resilient when impact oil trade and subsequent prices. making real estate decisions through Phase elections, in the summer of 2020, London the future relationship with the EU. CONTAINING CONTAGION Ironically, in the same vein climate change is also heading back to the polling booths I, the impact of Brexit on specific industries is another equally derailing factor, with to elect its Mayor. The London mayoralty is will now gain greater scrutiny throughout There are other factors at play that varying degrees of national, corporate or currently held by Sadiq Khan; a position of the year. may derail economic growth, impacting even individual support ahead of a UK led considerable sway not just at a local level, businesses both domestic and international. COP26 summit at the end of the year. The 18 19

THE OCCUPIER - Q4 2019 2020 PREDICTIONS

LONDON OFFICE THE TENANT RENTAL GROWTH EXPERIENCE TO TAKE 2 TO INTENSIFY IN 2020 3 CENTRE STAGE

For the past couple of years tenants on for some CENTRAL LONDON OFFICE MARKET: In 2020, we expect to see a renewed focus Whilst the primary function of the office PLACEMAKING ALL BUILDINGS the hunt for space across central London locations took AVAILABILITY & PRIME RENTAL GROWTH RATE on the experience that is provided to remains the same, the way in which have benefitted from several factors a significant tenants. This is to say that landlords and we undertake such work can take on a Placemaking is a concept that has generally 18 12% including high levels of availability, new step-change. developers will increasingly recognise variety of formats. Increased corporate been used in relation to curating largescale 16 development schemes, and landlord This is 10% how providing the best space and service and personal agility demands different redevelopments whether it is residential, 14 uncertainty regarding Brexit. It is these that especially can and will lead to a superior customer workspaces not just in the demise of the commercial or both. However, landlords and 12 8% experience. office. The way in which we interact with developers should take on more of these have allowed the negotiating power to the case in q ft 10

6% % principles and apply them to their buildings, rest in the hands of the tenant. However, in areas such 8 our colleagues and clients is also shifting

Million s Million whether it is for the smallest or largest 2020 we expect this to start to shift back as Aldgate 6 4% What a business wants or even expects and becoming less formal. The opening scheme. Providing amenities in the office towards landlords as upward pressure on where prime 4 from their office space is increasingly of communal areas such as receptions to 2% rents intensifies and incentive levels begin Grade A rents 2 changing. Whether that is the way we work, provide meeting spaces or workstations is building or local vicinity are key elements 0 0% client entertainment, free time or even one way in which landlords have started of the tenant experience. to contract. increased by 2014 2015 2016 2017 2018 2019 how we socialise out of work hours. The list to respond. Heavily influenced by serviced 56%. Other Availability (m sq ft) Annual rental growth % The divergence of falling availability and examples of ‘must-haves’ and ‘likes’ is considerably offices, landlords are also expected to One example of this is British Land’s strong demand has reached a point in include King’s Cross and Midtown this into account and appreciating that different to that of ten or even five years feature more flexibility in their buildings to current redevelopment of 100 Liverpool some districts where there is only one where prime rents rose by 14% and business confidence may still be shaky until ago. As discussed, in previous editions of cater for different tenant needs. Street. In its previous guise, the building direction for rents to go, that is up. Whilst 13% respectively. Even in the traditional Brexit Phase II has been concluded, our The Occupier, the voice of the workforce has was very much a corporate office building the average growth rate for prime rents submarkets of Mayfair the rental level expectation of rental growth is an average got louder, not least of all with regards to with a small parade of shops at the lower in 2019 was relatively conservative at 3%, jumped by 14% to £130.00 per sq ft. These of 5% across central London submarkets in input on the office and its environs. level. When new tenants move in late areas such as Clerkenwell, Farringdon, were indeed market shifting increases in 2020. King’s Cross and Paddington have gone pricing, ones which to some extent are beyond this pace and set new record rental already factored into current levels, despite Whilst our predicted average growth rate levels. Predominantly spurred on by new the few occasions of discounting in the appears to be just a notch above what we and sometimes taller buildings, for which a intervening years. have seen in 2019, premium is sought for both, the rental tone we are mindful and expectations have risen accordingly. Fast-forward to “5% predicted average of the increases Whilst this is generally anticipated for areas January 2020 and rental growth in 2019” that have already of redevelopment, the latter part of 2019 we have a similar been recorded in has seen increased pressure on rents and scenario starting some submarkets. incentives in traditional office locations the year off with a 14% fall in availability. The attraction to the best-quality space, such as the City, West End and Midtown So, equally are we to expect to see the willingness to secure it by paying top rents where the squeeze on available space has same level of increase in prime rents over has seen businesses go earlier than needed become more acute. the coming year? to beat the competition. Add in the weight of demand in recent quarters it has meant The current supply-demand dynamics Whilst the historical pointers indicate that the pace of pressure on rents has mirror those that occurred in 2015. Two- that the coming year could see strong already been exacerbated and we will likely years of above average level of leasing growth in 2020. We believe the strength see movement in the first half of the year. contributed to a 14% drop in availability. of this growth will be tempered by the Single-digit growth will still push Grade A

A drop that rapidly continued throughout fact some locations have already realised and B prime rents further into new rental 100 Liverpool Street 2015 and led to an average prime rental punchy increases and incentives have territory for some fringe locations and www.broadgate.co.uk growth of 11%. Rental movement in 2015 yet to be reined in by landlords. Taking strengthen rents in more traditional ones. 20 21

THE OCCUPIER - Q4 2019 2020 PREDICTIONS

2020, the experience will be significantly widely seen as a key tool deployed in the tenants to helps curate a local area, thereby GREEN FIT-OUT enhanced. In addition to the high-spec, competition for attracting and retaining top enhancing the tenant experience. high design-led office space, tenants will talent. Whilst the design and function of For several years, the have access to a substantial uplift in retail the workplace can contribute a great deal A landlord is often seen as that person/ real estate industry provision, restaurants peppered throughout in achieving recruitment goals, they can be entity who is visible at the beginning of a has made inroads into the building including the landscaped boosted by an enhanced experience. The lease and at the rent review and expiry. A developing sustainable rooftop. Whilst this is part of British Land’s difference between taking a job could be non-transactional relationship should be office buildings own wider Broadgate scheme, which has down to the number eateries or bars in the sought in order to achieve the maximum through use of new enabled them to change the public realm local vicinity. It could also be the provision out of the office. Working in tandem technology, materials and footprint, the principles and aspirations of green or quiet spaces. Wellbeing, both will enhance the experience for both and construction of such a redevelopment are clearly in and out of the office has increased in parties. Time and energy invested in such processes. This will experiential led. Elements of which could importance and recognition. relationships will lead to improving the continue as more be incorporated into a good proportion of ‘tenant offer’ and in-turn increasing the let- and more developers buildings around central London or any UK city. RELATIONSHIP BUILDING ability of schemes now and in the future. ensure that their schemes adhere to Whilst some of these elements are outside A TOOL FOR TALENT tighter environmental a landlord’s control, it could merely be a regulations and seek to The workplace is no longer viewed as case of having an active landlord in the achieve accreditation just a part of a company’s operation, it is local community, in partnership with its such as BREEAM, LEED or SKA ratings. Dthree project for client, Methods SKA Rating - Silver Whilst a blank canvas presented to tenants could well and use. Fundamentally using less and less design and build plans through to the type achieve its green credentials, a subsequent one-use materials. of paint used, a business’s commitment THE GREEN AGENDA fit-out could negate them. The use of to the cause will manifest itself in many unsustainable materials and practices TENANT CHOICE ways. Reducing the corporate impact on SET TO INFLUENCE will go long way to undermining the the environment will filter through the The influence of the green agenda on 4 base build. As a result, tenants will have entire supply chain, the office should be tenant decision-making with regards to TENANT DECISIONS a greater expectation that a fit-out will seen as a facilitator to change rather than a the workplace looks set to grow. Whether be sustainable and be environmentally contributor. responsible through design, construction it is the initial choice of office building/ workspace, A myriad of freak weather events, flooding, off a reliance on carbon, all at varying environment. More importantly, reporting the choice of droughts, fires and rising sea levels have degrees of commitment and success. With their progress against the set goals. all been beamed onto our TVs, highlighting global temperatures increasing at a greater Whether it is a simple case of improving the reality of global warming and climate rate, protests and activism ramped up in recycling provision within an office or change. In 2019, the recognition that 2019. From occupying streets in major ensuring that power supplies are derived the world is in the grips of a climate cities, to the walk-out of students in schools, from renewable sources, small steps can be emergency increased and was thrust into the calls for action have grown louder. taken to make a big impact. the consciousness of everyday citizens. Businesses however large or small will find As such we expect that 2020 will see the it more difficult to shy away from doing However, the increased scrutiny on this wider green agenda influence real estate their bit, especially in the workplace. subject is likely to move the scale of decision-making not just by property contribution further up both an individual’s developers and landlords but by tenants CORPORATE RESPONSIBILITY agenda and that of the business. also. Expectations from staff and clients to take Terms such as Corporate Social not only bold steps but to prove it as well, Responsibility (CSR) and Environmental, Since the discovery of damage to the will grow in importance. Reducing the Social and Governance (ESG) are ways world’s ozone layer in the 1980’s, climate corporate carbon footprint has until now in which a company can clearly outline change has been a prominent topic. been about achieving carbon neutrality, the Dthree project for client, Methods the steps it is taking to have a positive SKA Rating - Silver Countries, corporates and people around urgency for change has shifted the dial, now impact on its employees, clients and the the world have strived to wean themselves it is about going carbon negative. 22 23

THE OCCUPIER - Q4 2019 2020 PREDICTIONS

A REGIONAL ‘OFFICE’ TECH IN THE WORKPLACE - 5 RENAISSANCE 6 WHERE NEXT?

Office leasing activity across regional outside of London to house its jobs in certain sectors. It is hard to believe that the World Wide like never before, the capturing of data only two operators can offer the service. It cities has been robust in 2019. The high software and research development Web (WWW), or the internet in its current through our various devices such as is currently the larger cities such as London, level of demand is expected to further teams The regional office markets have several form was not mainstream until 1995. In smartphones, laptops or even key passes, Cardiff, Birmingham and Manchester fuel a renaissance for office locations • GCHQ, the government intelligence unit key attributes that appeal to businesses. December 2019, internet sales accounted means that the office design process that only benefit from being switched outside of London over the coming years, lease 63,000 sq ft on Albert Square, to tap The rental difference between space for 21% of all retail sales, triple of that will be more widely influenced by data on. Yet, the impact that 5G can have on a as businesses both domestic and global into the burgeoning student population in London and other UK cities possibly recorded 10 years prior. The first iPhone and interpretation than the opinions business has possibly been underplayed eye the benefits of the regions. being the most appealing. Prime rents was not launched until 2007 – 2.2 billion of stakeholders. The improvements in in contrast to personal benefits gained LEEDS in Manchester and Birmingham can be have since been sold. Our adoption and technology and accessibility means it by video streaming, gaming or general In 2019, leasing activity totalled 780,095 between £32.00 and £36.00 per sq ft. This subsequent reliance on technology has is even easier for us to utilise smart online activity. The arrival of 5G can give • Sky Betting & Gaming have pre-let sq ft across Birmingham city centre, is nearly half of what is asked for in the influenced every part of our lives, whether technology, online surveys, and feedback businesses increased reliability of working 136,000 sq ft at 4 Wellington Place in representing a 3% uplift on the previous City of London market. Whilst appealing, it we see it or not. The pace at which tools and apps to track movement and wirelessly, remotely, increased productivity, order to consolidate operations year. Similarly, Manchester city centre take- is not the only factor. The access to talent technology has impacted the workplace is habits across an office. All of which will and in some cases achieve cost savings. • BSKYB have taken 31,000 sq ft on up in 2019 surpassed its long-term average is a growing need for businesses and with equally as fast and transformative, changing feed into an initial design of a new space 2020 is expected to be the year that the Whitehall Road by 23% to total 1.4 million sq ft, and in some of the largest student populations not just how we work, but what work we or can help support the function and flow business community benefits from this • Channel 4 have pre-let 26,000 sq ft on Leeds demand for office space grew 7% to outside of the south east of England, cities do and from where we do it. 2020 will be of an existing space. The workplace is a additional network capacity. City Square to house its new corporate 743,192 sq ft. These volumes indicate the in the Midlands and the North have such no different with regards new technologies, treasure trove of data on how a business HQ that will move from London. They buoyancy of the top three office markets a talent pool. Access to housing (relatively but what do we expect to be the game functions, now is the time that trove is Automation and Artificial Intelligence – have taken an additional 11,700 sq ft on outside of London. Behind these numbers affordable) is also a driver for firms that changers for the workplace. opened and used. Manual inputting and analysis of data West Gate, Grade Street are some significant deals listed below. look to the regions, giving the optionality can be labour intensive and prone to for its workforce to get on the housing Smart tech gains traction with tenants – 5G has arrived – the next generation of human error. We work in a world where Businesses that have chosen to lease office BIRMINGHAM ladder or have shorter commutes and Smart technology and its use within a mobile connectivity which provides faster data and information are a core part of a space outside of London include HSBC access to countryside – all of which can be building and workspace is not a new speeds and greater reliability for mobiles business, whether its budgets or expenses, • Platform 21, Stephenson Street: 110,800 that opened a new HQ in Birmingham in more easily achieved out of London. concept. But the take-up of this technology phones and other devices was partially project management or manufacturing, sq ft leased by UK Government as a 2018 – out of the capital. Similarly, Barclays to date has generally derived from large deployed in 2019. Full coverage across the the streamlining of day-to-day processes regional hub Bank who moved several hundred jobs out The latest raft of deals is also seeing the corporates, developers and a few of the UK has not yet been achieved and to-date through automation are surely to be • WeWork lease 3 spaces totalling 232,500 of London to be based in Birmingham. growth of serviced/flexible provision by the tech-savvy flexible office operators. We sq ft as the flexible office provider Channel 4 is currently doing the same with its large operators such as WeWork and Spaces expect this to turn mainstream this year expands its coverage move to Leeds, and banking giant Goldman branching out of their preferred London as confidence in the benefits, whether its Sachs is looking at moving its technology submarkets. Such moves indicate they are cost, effectiveness or the usability, increases. division northwards to either Birmingham MANCHESTER hoping to get ahead of the curve of their The connection to lighting, heating, water, or Manchester. • 125 Deansgate: competitors, but more importantly follow electric and air conditioning systems and UK cities are 117,030 sq ft occupier trends towards flexibility. personalising the output, not only improves no longer leased by Spaces, energy efficiencies but can also improve the viewed as the the flexible office Whilst much of the narrative of this wellbeing of staff. Increased use of similar back-offices provider as prediction majors on businesses looking technologies in the home environment has for corporate expansion space outside of the capital to house its office given rise to businesses having the belief to UK, and • Amazon take functions, it should equally be viewed as explore and embrace. London is no 92,000 sq ft on regional office markets are continuing to grow longer viewed Hanover Street, their appeal, their office base and becoming Operational analytics to aid office design – 125 Deansgate, Manchester as the only its first fficeo Source: www.glennhowells.co.uk more relevant to firms of all sizes and sectors. with the world connecting via technology place to get 24 25

THE OCCUPIER - Q4 2019 2020 PREDICTIONS

welcomed by businesses. Some industries and competitive advantages. These changes Technology in the workplace and its are expected to start in 2020 with first such as the professional sector have been in the workplace are not designed to subsequent impact on real estate is buildings coming out of the ground in resistant to change – adding the personal downsize the workforce, they are to provide evident in the amount of office space that 2021-22. The site will incorporate a touch is seen as the value-add. However, the opportunity for workers and businesses businesses take, more importantly how new railway station, Brent Cross – West the ever-increasing sophistication of to concentrate on the human aspect of they then use the space they have. The Thameslink. software for almost all business sectors a job. We expect that 2020 will see an requirement to house large data rooms, is revolutionising the workplace. Taking it increase in sector specific technology archiving and in-house libraries have all EAST LONDON one-step further and introducing artificial applications to modernise and improve the waned. The increase in the use of space As heavy industry moved out of London it intelligence (AI) to automation processes workplace and its jobs. for people is now more of a business has left behind swathes of docks, factories could achieve further business efficiencies imperative. and warehouses in East London. Whilst residential development has driven regeneration of these areas, the commercial element has been less than forthcoming. Yet, renewed commitment and investment will see momentum gather at the Royal THE RIPPLE EFFECT - Brent Cross South Albert Dock site and further progress on Source: Copperstones plans for Silvertown Quays, both of which THE NEXT GENERATION will boast new business districts with 7 a combined total of over 8 million sq ft and in the shadows of Canary Wharf across Research shows us that businesses of all OF OFFICE MARKETS of commercial space. Whilst the former the river, Canada Water with its excellent sizes are starting searches a lot earlier has already started development and transport links via the Jubilee tube line than previously. Securing space ahead of even delivered some space, the pace and and the London Overground line is set to the competition has certainly heated up become Zone 2’s newest office location. in recent years. Businesses who may have Fuelled by global trade and industry, that despite some still being in their WEST LONDON quantum has been lacking. Yet improving London has evolved from a collection of infancy or still being built out, other areas links with Crossrail, expansion at nearby The mixed-use masterplan that received wanted to move to the redevelopment small villages, rippling out from Mayfair and are piquing interest. Old Oak Common – the redevelopment of City Airport and increased frequency of the seal of approval in 2019 is expected of Battersea Power Station were beaten The City to become the megacity it is today. the railway maintenance depot is to become river boats should give this location added to deliver up to 2 million sq ft of office to the punch by Apple’s pre-let of the The future of London will continue to be The new kids on the block in terms of a key transport hub for London and the credence. As for Silvertown Quays, gaining space. The proximity to central London will entire first phase of the scheme. Pre-lets built on this, but as both its population and locations include White City, Vauxhall-Nine south east. A new station will provide an planning permission for its first phase of make this an exciting opportunity for some at IQL Stratford by TFL and FCA secured business communities keep on growing, Elms-Battersea (VNEB) and Stratford. All interchange for HS2, Crossrail and other works is a step forward for this scheme. businesses. the newest buildings to greet you at the central London is becoming crowded. So, three of these have been driven by the national rail services, creating what is Olympic Park. Businesses especially larger where will the next generation of London wider regeneration of the local area and expected to be one of the busiest points SOUTH LONDON For tenants, why start thinking of these ones continually assess their space plans office markets be and why should tenants investment into public transport links. The on the network. The recent recommitment locations now? There are two main and adjust them accordingly. Canada Water – A stones throw away from be thinking of them now when they are not latter more famously developed as a result by the Government to continue with the reasons; beating the competition and a the established Southbank office market even built? of the 2012 London Olympics. The speed HS2 project is expected to spur on plans for price point. Those changes may suggest they exit a at which these areas have not only been the wider regeneration of the area. Plans lease early in order to benefit from the new Canary Wharf Masterplan space and location. These could be gains Canary Wharf and the Docklands is the built out, but also attracted high profile which will see it bring forward not just Source:YouTube, Wagstaffs most recognisable modern office market tenants is like lightening from a historical new residential development but a new related to personnel, productivity and/or a that has developed in recent times. Since comparison. Apple at VNEB, Publicis and commercial district. cost. Staff links to the physical office may be the first office building topped out in 1990, Net-a-Porter at White City, TFL, The FCA, BT easier, access for clients may also be better. the 97-acre estate has continued to evolve, Sport and UCL at Stratford are just a few NORTH LONDON A new location out of central London could with Wood Wharf to be its latest addition. of the well-known names supporting the help with access to talent or housing for the Brent Cross South – An ambitious plan Other areas which have firmly established growth of these locations. workforce. The benefits to a business are for a new town centre and mixed-use themselves as core central London business not necessarily linked to the bottom line. development close to Hendon and districts include Paddington, King’s Cross The next generation of office markets Regardless of the drivers, the success of the Cricklewood looks set to deliver 6,700 and the Southbank. Whilst developers and across London which are waiting in the new office markets in the past few years, new homes and over 3 million sq ft of landlords look to develop further within wings for their moment to shine, continue shows that tenants are not just location office space. The masterplan has a timeline these business districts, the fast pace at the ripple effect out from existing markets. agnostic but are also willing to take a punt of 10-15 years and with development which new office locations have been Where are they? on driving new areas of London forward. contracts signed in 2019, enabling works developed over the past 30 years means 26 27

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and as a result leave it to the market to see several differentials between providers. and our leasing team. deliver. Whilst this has not happened, These could include the length of terms EVOLUTION OR REVOLUTION landlords will be sure to have made (both long and short), greater agility across What is clear is that differentiation will contingency plans, especially those with portfolio, advantageous rental incentives be an important platform for providers OF THE SERVICED WeWork in their properties. or more bespoke packages for different in 2020. In some cases, reinventing 8 companies. We also expect some providers propositions with greater emphasis on OFFICE MARKET? Expanding the range of flexible leasing to go niche with their centres and products value and service. The tenant / customer solutions on offer to tenants will gain by targeting clients by size. Navigating will be centre to any offering, in a crowded traction in 2020. Whilst coworking, fixed the various products that currently exist market, businesses can vote with their feet The serviced/flexible office pay close attention to occupancy within desk and managed spaces continue to form and potentially be launched, will prove and the market has enough other options! WeWork, Shoreditch market in the UK has each of their centres. This is not to say the backbone of provision, we expect to interesting for both tenants we represent continued to grow at a fast that we will not see any new entrants, we pace in 2019. Flexible leasing are certain that many more will launch, has become an intrinsic part especially in the nascent regional city of the range of leasing options markets. for tenants, regardless of size, sector or even location. However, in the face of such stiff PUTTING THE SERVICE However, during the summer competition we do expect to see an months the corporate turmoil element of consolidation amongst the BACK INTO of WeWork threatened to providers. One such casualty in 2019 derail the operations of was Central Working, who went into 9 SERVICED OFFICES the largest provider and administration. What was once a success subsequently placed scrutiny story and despite a market that is on a market that was experiencing high demand, it struggled to already viewed by some with make some of its centres profitable. Whilst Over the past few years, the race for space expected to make a scepticism. Weathering the whole businesses failing are hopefully and customers has seen some operators deep commitment storm in 2019 the market few and far between, it is more likely that increase their portfolio of centres but slip both financially and continues to evolve, but what in order to gain a little more coverage, we behind on the service offering and more operationally, you can we expect from 2020. shall see providers acquire portfolios of importantly their relationships. 2020 should want to have the centres. see providers refocus their operations to comfort of dealing Coverage has become become more service centric. An increased with someone who king for a good number of The closure of competition and a growing agility from is also committed. providers, keeping one eye on the jewel centres through businesses will require differentiation in Educating and in the crown (London), with the other on financial difficulties order to compete. We believe that ‘service’ upskilling teams, regional expansion. However, as quickly as do prompt questions can and should be that differentiator. giving them the the market for flexible space has grown, so surrounding occupier deep knowledge of too has the competitive landscape, putting protection. The As with all new relationships, first the building, of the pressure on existing business models agreements are impressions are important. This is true tenants, the local and future plans. As we discussed in our in place between of when clients are viewing prospective area and the transport networks, is vital. to better aid the client experience, and predictions report in 2019, the number operator and tenant, offices. The serviced office centre has the Whilst extolling a potential list of benefits, ultimately secure the business. We predict of firms offering flexible solutions would yet the uncertainty potential to be the new home of this client it would also be prudent to point out any to see an increase in providers using virtual increase further with landlords/developers arises when that and as such their first impressions must be downsides. Being open and upfront at the touring and/or mock-up office designs launching their own products. This appears operator is unable to satisfied. Whilst for some this could be the beginning will start the relationship on the to better engage with a business, rather The number of market players continues to have only further fuelled the appetite fulfil its obligations. physical surroundings, for others it may be best footing. than having to rely on imagination. One to increase but whilst that improves the of providers. In London alone 17% of office It is seen that the ultimate landlord that initial interaction with the provider. space does not fit all and listening to choice for tenants, the pressure on the take-up in 2019 was by operators. Just could take on a duty of care. Landlords Having a representative who can walk a It is often the case that when a business prospective clients and their advisors on viability of each centre increases. In 2019, one rung behind the total leased by the may consider taking on centres in their group of people around a building and views a centre, it is someone else’s space, the list of requirements will go a long way several centres closed in London and financial sector. buildings, however, on balance most will loosely touch on a pricing structure will not or you are shown similar. This is where to ensuring that expectations are met upon around the UK. Whilst not prevalent on a recognise the complexity of the challenge be enough for today’s tenants. If you are technology and visuals could be deployed moving in. large scale, it does suggest operators will 28 29

THE OCCUPIER - Q4 2019 2020 PREDICTIONS

Businesses also want transparency from facilities, but the whole client experience business is put off by one experience, they their providers, whilst agreements are from tea bags to rent payments. The are less likely to remain loyal. It is this relatively comprehensive, subsequent sharing of good and bad practices amongst loyalty that is currency for the serviced charging for additional services or requests centres should be standard. When a office operators, earning and retaining it INCREASING DEMAND for upgrades do little to foster good will in such a or even better relationships. Even the competitive 10 FOR LAST MILE LOGISTICS knowledge of where an initial deposit is market will kept can sometimes give a business that be no mean piece of mind. An occupier wants to feel feat. protected and secure in their space. As such E-commerce in the UK has evolved at this can be quite development that will we believe that providers will increasingly such a remarkable pace and now covers a overwhelming. Larger be using a centre is introduce their own guidelines of conduct, multitude of industry sectors and products. businesses in their 22 Bishopsgate in the beyond the normal terms and conditions. As early pioneers of technology and retail, own buildings with City which is due to the UK has become the largest e-commerce delivery areas can also complete construction Engagement with businesses who are market in Europe, and the third largest be inundated. Taking in Q1 2020. When already in-situ is probably the easiest in the world. However, as fast as the the City of London operational, all service win a provider could have – being market has grown, consumer expectations office market as an deliveries whether available to listen to client’s feedback and have also escalated. Demands on speed, example, the largest it be post, food and using it to improve not just the physical delivery times and delivery locations central London office drink, or the pair of have increasingly become a challenge for market was home trainers that you retailers, not least of all as the customer to 23,890 firms and ordered will in the base is not just the home shopper, it is 522,000 workers in first instance be also businesses. The complexity increases 2019. Even if just 1% delivered to the when the volume of the two are combined of this figure ordered centre. Then these SEARCHING FOR and the logistics of that last mile to the something online and will be caught up in doorstep becomes longer and costlier. got it delivered to regular deliveries to We believe that the need for well-located work, it would account and from the centre. 1 DESK OR 1000? 22 Bishopsgate logistics centres within easy reach of major for 5,222 deliveries. Source: www.wired.co.uk Whilst this example cities and towns will significantly increase The impact of this was part of the in 2020, prompting not just developers demand then shifts to the roads, and with planning process for the skyscraper in order Find your flexible workplace and retailers to act, but also the business it set to increase further, firms are taking to cut down on traffic, other firms around consumer. some bold steps. London are also emulating this model. solution with Many an office building can at times The most strident of moves has been With a greater awareness of the become like a mini depot for deliveries, by firms who have banned its workers environmental and social impact of the especially at peak periods such as from receiving personal items at work. increasing number of deliveries, we expect Christmas. Workers are increasingly using Whilst for some this can alleviate the to see an uplift of larger businesses the office location as a delivery address burden on the workplace, it does shift the more willing to adopt tactics such as and for some multi-tenanted buildings logistics delivery elsewhere. Some larger consolidation centres. It may even spur on firms or large the establishment of community/district multi-tenanted schemes. Yet, availability of warehousing SERVICED CO-WORKING MANAGED INCUBATORS buildings are or suitable buildings to house these OFFICES OFFICES employing the use facilities have become increasingly scarce of consolidation in and around our cities. As a result, centres outside of values for this kind of asset for investors SEARCH. HAND-PICK. MOVE IN. the centre. will improve, hopefully sparking further interest to ameliorate the last mile of for all Get in touch today to begin your FREE search on 020 7096 9911 or [email protected] One such high- consumers alike. profile new Finding office space. Made simple, fast & personal. 30 31

THE OCCUPIER - Q4 2019 YOUNG MINDS YOUNG MINDS: DESIGNING A COLLABORATIVE SPACE

In each edition of The Occupier, we showcase a project that encapsulates the breadth of service that the DeVono Cresa PART OF THE Group can provide. Here we take a look at GROUP the exciting work we undertook supporting spaces, one including a different floor of the WORKPLACE CREATORS Young Minds, which started with DeVono building they now occupy, which they fell Cresa acquiring their new site, through to in love with instantly so when their now to ensure the space was exactly what they design and fit-out by Dthree. occupied floor became available, it was an required now and in the future. obvious choice for them. We were then able Young Minds wanted to create a space to start working on the design of the space WHAT CONSIDERATION WAS that truly celebrated what they do and an with them from the very beginning to help THERE FOR FUTURE OFFICE environment where everyone, including them create the perfect work environment DEVELOPMENT AND COMPANY their activists, could be together and feel for Young Minds with all their established GROWTH? comfortable. In order to achieve this, Dthree needs accounted for. worked closely with the Young Minds team Jess: There is space for expansion 12 months prior to their move on a workplace regarding fitting in typical desks. As part WHAT FACTORS WHEN consultancy piece to fully understand what of the brief we wanted to create a large SEARCHING FOR A NEW OFFICE they needed from their new workspace. The flexible working breakout space so there WERE IMPORTANT FOR consultancy consisted of staff engagement is plenty of hot desk options for those YOUNG MINDS? surveys, desktop working analysis, furniture that don’t require standard desk space. We process so could design in collaboration audits and a building search analysis. Tom: The key factor in the building search planned around predicted head counts with the client right from the get-go. Dthree’s Senior Designer, Jess Willdigg and was to enable and encourage the staff to and designed flexible areas as well as This allowed us to research effectively Project Director, Tom Aird talk to us about interact more. In their old space, they were future proofed provisions for expansion and de risk the project giving Young their experience working with Young Minds, split in half (albeit with a connecting desks which will allow plenty of growth Minds cost certainty ahead of site and how the design enhanced the tenants corridor) but cross team interaction was opportunities within the space. works by working closely with key sub- experience, captured the green agenda, minimal and therefore, a problem for Young contractors to drive efficiency. considered the impact of technology and the Minds. HOW IMPORTANT WAS A outcome of the finished product. SUSTAINABLE WORKPLACE HOW WAS THE GREEN AGENDA Jess: It was vital that the design of the FOR YOUNG MINDS? USED IN THE DESIGN OF THE HOW DID THE BUILDING space enhanced collaborative opportunities Tom: It was very important that the SPACE? INFLUENCE YOUNG MINDS’ amongst the teams. Natural light was environment Young Minds work in WORKING EXPERIENCE? also important for their new space as they Jess: At Dthree, we work with promoted wellbeing for not just their staff wanted an open and airy workspace that various manufacturers who ensure Tom: The location was key with the staff but also their advocates who spend a large upon first impression, would instantly create sustainable design is at the forefront of wanting to remain within close proximity amount of time in the space. a welcoming atmosphere for all their visitors HOW IMPORTANT WAS IT FOR more conscious as a team and company to their products. For example, the carpet we to London Bridge as most employees used and activists. YOU TO CREATE A SUSTAINABLE improve the industry standard. This ethos used throughout the space is made from this transport hub. It was also key to have Jess: Wellness was a huge focus point WORKPLACE? was carried out on the Young Minds site recycled content, the paints we used are all good transport links to the Houses of throughout the project, giving the HOW DID DTHREE HELP THEM both during and after construction. water based so don’t have as many VOC’s Parliament due to the nature of the charity. team areas to take a bit of time out for ACHIEVE THIS? Jess: Being in the construction industry in comparison to most commercial paints, We undertook various travel studies to ensure themselves where they could switch off we are aware of the amount of waste that HOW DID YOU WORK WITH the joinery wood is sustainably sourced, and staff happiness and retention was sustained Tom: A number of test fits and design and recharge. By creating a large breakout can be generated on sites during projects. YOUNG MINDS TO ACHIEVE THEIR the fabric used is from a British supplier so when considering all possible locations. concepts were carried out across various space, this offers lots of flexibility as well as We strongly believe as designers and BUDGET? has a low carbon footprint and made up of different spaces in the London Bridge booths and a quiet room with more privacy, project leaders that it is our responsibility natural materials such as wool. Jess: We space planned a lot of different region to stress test and question their brief truly supporting the nature of what they do. to reduce this where possible and be Tom: We were appointed early in the 32 33

THE OCCUPIER - Q4 2019 YOUNG MINDS

WHAT ARE COMMERCIAL they had faced in their previous DESIGNERS DOING TO KEEP UP space. We had a great rapport WITH THIS GROWING NEED? with them and collaborated well all the way through. Jess: As a designer, being mindful is vital. It is every designer’s responsibility to WHAT DID YOU ENJOY be aware of the sustainability elements MOST ABOUT IT? within their designs and selected products. Understanding what you can do to improve Tom: Seeing the huge shift in these by researching alternative products culture of the employees to work where possible and ensuring your client in a truly bespoke environment is aware of the improvements that can to their needs and that of their be made. Today, it is not just designers partners. Young Minds have an who are trying to be better, suppliers and employee who occasionally manufacturers are also looking to improve requires a wheelchair and it was their process and product properties, so the first time she said she felt departments. regardless of your budget there is always WHAT ROLE DO YOU BELIEVE truly independent in an office because it The staff are no something you can do to help ensure a TECHNOLOGY WILL PLAY IN 2020? was well thought-out. longer tied to a more sustainable approach. I’m sure VR & AR will play a further desk, given the Tom: Jess: The people. It was a hugely fulfilling role in showcasing design work and differing working project to be a part of and they were just a HOW DO YOU THINK DESIGN furniture I’m sure. Lighting and ventilation environments great bunch of people to work with which WILL EVOLVE TO SUPPORT will become smarter and more sustainable available to made the process very enjoyable and SUSTAINABILITY IN 2020? in the coming years and adjust to the them, which is smooth. Jess: I think design will continue to evolve not only great flexing population without human control. to support sustainability, with more and for supporting WHAT STANDS OUT MOST TO YOU more companies looking for new ways wellness in the workplace Jess: Technology is still very expensive, so by offering complete IN THEIR WORKPLACE AND WHY? to be sustainable in their manufacturing but will also improve their it isn’t always achievable for every client flexibility for their processes and designers becoming more productivity levels and in their budgets. It would be great to Tom: The collective expression of their people, was a must. aware and accountable for their designs. enhance their company see technology become more affordable culture. Having got to know them over Enabling their Although we have already seen a massive culture across the business. and therefore accessible over the next the seven months leading to the project, staff to drop in and shift in this direction 12 months so all businesses can benefit I really feel it is their home and will help over the last few years, HAVE YOU NOTICED from it without making design sacrifices them grow and try different things in the within the next 12 “Design will continue A CHANGE IN elsewhere. years to come. months we will see TECHNOLOGY NEEDS this continue to grow to evolve to support IN THE WORKPLACE? HOW WAS THIS PROJECT Jess: Their personal involvement with the and filter down to the DIFFERENT TO ANY OTHER YOU graphics really makes the space feel like sustainability” Tom: Workspaces need details of design, for HAVE WORKED ON? Young Minds home rather than a generic to be more agile allowing example using clever office. The involvement with the activists for complete flexibility Tom: The early appointment meant we joints in joinery to minimize the use of was hugely fulfilling and made it really work wherever they and agility more than ever. were able to design alongside the client glues and adhesives. special. wanted within the Technology needs to be and our suppliers from the very beginning, space with seamless seamless and intuitive in which in turn permitted us to provide HOW IMPORTANT WAS Visit dthreestudio.co.uk for more docking, easy to access order to support this. cost certainty upfront. With more lead in TECHNOLOGY TO YOUNG MINDS information. WiFi throughout and to connect easily to HOW WILL THE TECHNOLOGY OF time, contractors could survey multiple AND WHY? all AV equipment. Having a better desk THEIR SPACE HELP YOUNG MINDS Jess: Everything needs to be simplified in times allowing us to increase efficiency in Tom: Technology was vital in ensuring set up was also important to the client GROW AND PROGRESS IN THE the workplace – businesses want their staff delivery. complete flexibility for Young Minds staff. with specified task chairs and adjustable NEAR FUTURE? to be able to just drop in and work without As wellbeing played such a vital role in the monitor arms to give their people complete any complications – Technology is what Jess: They were a great client to work with Jess: The technology used allows for design of the new space supporting this control and flexibility over their own keeps this wheel turning. and knew exactly what they wanted from greater collaboration amongst teams and comfort. their new space due to the challenges 34 35

THE OCCUPIER - Q4 2019 ABOUT DEVONO CRESA

The workplace is under great pressure to perform and be all things to everyone – and it is our business to understand this challenge. 2019REVIEW GROUP DeVono Cresa is the UK’s leading occupier-only consultancy firm and proud to be part of Cresa, the world’s number one tenant only advisory firm.

Projects We specialise in providing real estate solutions to support our clients’ complex and specific + business objectives. delivered £41M for occupiers A significant part of our role is helping our clients to understand and define their £ 166 occupational requirements. We take into account key factors including talent challenges, Savings headcount forecasts, operational priorities and cost considerations to help craft a brief that delivered Clients is not only fit for purpose today, but will also deliver a sustainable occupational footprint to occupiers advised 256 moving forward. We achieve this level of insight by fully understanding how your business works and where it is headed.

Solutions delivered for our clients: Our team cares about leaving a lasting and positive impact on our clients. Success is not defined by a lease or agreement being signed; it’s about a culture being positively influenced, a workforce being engaged and ultimately providing a platform for future growth. COMMERCIAL PROPERTY CONSULTANTS PROPERTY COMMERCIAL 1.07M+ 3,141 140K+ ABOUT CRESA DEVONO SQ FT Flexible SQ FT workstations of leasehold space acquired for clients Workplaces created by AGENCY FLEXIBLE GLOBAL DESIGN & BUILD CONSULTANCY transacted in 2019 our design & build team LEASING PORTFOLIO SERVICES

Proud to have supported in 2019:

OCCUPIER BUILDING RENT DILAPIDATIONS INSIGHTS DISPOSALS SURVEYS REVIEWS

Find out more at www.devonocresa.com

© DeVono Cresa 2020. This report is published for general information and professional advice should be sought. It was researched and written based on evidence available to DeVono Cresa. Also available online at www.devonocresa.com/subscribe-occupier/

E: [email protected] T: 020 7096 9911 @devonocresa www.devonocresa.com