“Rising rents and lack of suitable office space are key factors forcing occupiers to become increasingly footloose in their choice of office location with more than half of all occupiers, having moved part or all of their operations out of their existing sub market so far this year,” according to a new report from Cushman & Wakefield which analyses Central London leasing transactions and relocation patterns during 2013.
Key findings of the report include:
· Soho & Covent Garden saw the largest number of companies move out to a new submarket.
· The City Core has seen the largest net influx of companies so far this year, followed by Southbank
· Professional Services and Media & Tech companies tend to be the most footloose whilst Insurance and Legal firms are most loyal to existing submarkets
· Companies based in Victoria show the greatest loyalty of any submarket
· The continued migration of companies West End further East is evident
Cushman & Wakefield’s research was based on the analysis of 6.0 million sq ft or 154 transactions above 10,000 sq ft.
Figure 1: Number of in and out movers by submarket
Excluding new companies, 52% of all occupiers moved some or all of their operation out of their existing submarket with Soho & Covent Garden seeing the largest number companies move out. A recent example is Facebook, who will be relocating from its office in Seven Dials to 10 Brock Street in Euston, while Hill & Knowlton, for example, based at 20 Soho Square has opted for the Buckley Building in Clerkenwell.
George Roberts, head of occupier representation in London for Cushman & Wakefield said: “Occupiers of all sizes and sectors are trying to balance an equation of securing an outstanding environment that attracts talent but at a sustainable cost. With availability of supply varying widely in each sub market the trend for relocation across villages is set to increase particularly for more margin sensitive businesses.”
The submarkets that saw fewest companies leave include King’s Cross, Euston & Marylebone, Southbank and Victoria. In fact, Victoria occupiers show the greatest loyalty of any submarket, with 88% of all Victoria leasing transaction from companies already located in the submarket, followed by Hammersmith & Mayfair & St James’s.
George Roberts adds: “At the more premium end of the market, whilst the City is showing an ability to attract new occupiers, it would be wrong to suggest that this is to the detriment of Mayfair. Whilst the number of new entrants remains low to Mayfair and St James’s the evidence suggests strong loyalty to the location by occupiers already based in these core markets.”
Emerging fringe locations such as King’s Cross and Euston & Marylebone in the West End and Southbank, Clerkenwell and Shoreditch in the City have seen the highest proportions of in-movers: with more than half of all leasing activity involving companies previously located in other submarkets.
The steady migration of companies from West to East is very much in evidence and gaining momentum, as rising rents and low vacancy rates force occupiers to consider alternative locations. Around 15% of leasing transaction in the City submarkets originated from submarkets in the West End and West London during 2013 to date, while just 1% of West End transactions have come from City occupiers.
At submarket level, taking into account the number of companies who moved out and those that moved into an area, the City Core had the greatest net positive balance (12) followed by Southbank (7). The submarkets that saw a greater outflow of companies than those moving in were Soho & Covent Garden (-7), Mayfair & St James’s (-4) and the Eastern City Fringe (-4).
Figure 2: Take-up patterns by Sector
The media and tech sector showed the greatest willingness to move locations by number and were second highest by proportion. Just over seventy percent of companies in this sector relocated from their existing submarket: of these companies over half relocated from the traditional media hubs of Soho, Covent Garden and Noho. Southbank, Clerkenwell and Euston have been a target for relocations. The most obvious examples being Ogilvy & Mather, News International and Saatchi & Saatchi all taking new space Southbank and Clerkenwell, while Euston has attracted the social media companies of Facebook and Twitter.
To date in 2013, professional services companies have shown the lowest level of loyalty to their existing location this year. The highest profile transaction being the 200,000 sq ft relocation of KPMG from Salisbury Square in the City Core to 30 North Colonnade in Canary Wharf.
Just over 30% of banking & financial services sector companies moved between submarkets. Those that had previously been located in the City Core and Mayfair were more likely to remain loyal to their existing location, than financial services companies based elsewhere.
Unsurprisingly loyalty to location is strongest from within the insurance and legal sectors. Only 30% of lawyers have relocated outside their existing location, which is due to the fact that a similar proportion of legal deals have been for lawyers based in the City Core and these companies have been most likely to stay in close proximity to their previous location.
