THE LONDON OFFICE MARKET - Q1 2021 A GUIDE TO RENTS, RENT FREE PERIODS & MARKET TRENDS - Carter Jonas
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RESEARCH THE LONDON OFFICE MARKET Q1 2021 A GUIDE TO RENTS, RENT FREE PERIODS & MARKET TRENDS Follow us on Twitter, LinkedIn & Instagram
THE LONDON
OFFICE MARKET:
LATEST TRENDS
Is the office, as a place to operate a work, the office, indicates that a of their training, are likely to be less “LANDLORDS OF OFFICE Artificial Intelligence: Friend premises will take time – which
business, dead? How is the London return to the 9 – 5 five days a week suited to the Google and Facebook BUILDINGS SHOULD NOT or Foe? should enable the London office
office market going to respond work routine is unlikely for many approach to workforce management. UNDERESTIMATE THE Job creation is the key driver of market to adjust accordingly.
to the post pandemic structural businesses. As a consequence, there are likely LONGER-TERM IMPACT OF demand for office space. Advances
changes in occupier demand? to be fewer opportunities for ARTIFICIAL INTELLIGENCE. in artificial intelligence are beginning
These are the questions that I
“OCCUPIERS ARE RE-
such businesses to adopt working AI IS LIKELY TO SHAPE to reach a point where they are A Bright Future In The
am increasingly being asked by
THINKING THE WAY THAT practices that would necessitate less THE FUTURE PATTERN likely to have a negative impact on Medium Term
journalists, landlords and tenants.
THEY USE THEIR OFFICE floor space. OF OFFICE DEMAND employment growth, particularly 2021 will continue to be a year of
SPACE – WITH GREATER IN FAVOUR OF THOSE in areas such as law, banking and lower rents and longer rent free
EMPHASIS ON THE REQUIRING SPACE financial services where routine tasks periods, rising vacancy, greater
The Office: A Focal Point WORKFORCE UTILISING A Trend Towards Needing FOR CREATIVE AND can be carried out more cheaply and choice for footloose tenants and
For Business IT AS A HUB, WHEN Less Space COLLABORATIVE weak demand, as structural changes
efficiently by machines.
REQUIRED, FOR SPECIFIC PURPOSES – AREAS OF
My answer to the first question is On balance, however, the current Indeed those, like me, who work in occupier requirements result in
PROJECTS THAT REQUIRE BUSINESS WHERE THE
simple. No. The feedback that I and trend across London is for occupiers in the property profession are not the need for less office space.
TEAMS TO COLLABORATE APPLICATION OF AI
the other members of the Carter to require less floor space, reflecting immune from the impact of the However, in the medium term,
AND INNOVATE.” IS LIKELY TO BE LESS
Jonas Tenant Representation Team the desire to reduce operating costs, the London office market has, in my
EFFECTIVE.” AI revolution: machines are now
are receiving from occupiers is as well as the increasing adoption being employed to read leases and view, a bright future. The capital is a
As ever, the “tech-giants”,
very clear: businesses recognise of new working practices and, in undertake valuations. In the medium pre-eminent global technology and
including Google and Facebook,
the importance of the office as a some cases, headcount reductions. to long term AI is likely to have a financial services hub, underpinned
appear to be leading the way in
focal point for team collaboration, The experience of Carter Jonas’ depressing effect on the demand by its language, laws and culture.
developing workplace strategies to
innovation, training and mentoring. Workplace Consultancy Team is office accommodation – to reduce for office space. Landlords of office Overseas investment in London
accommodate new ways of operating.
Working from home cannot properly that the extent to which a particular their workforce’s exposure to using buildings should not underestimate based businesses will translate into
Both companies are introducing
address these important issues business can reduce its property passenger lift facilities. the longer-term impact of AI which an increased rate of job creation
what are, in effect, “spoke and hub”
that are key to fostering business footprint will be directly correlated Tower buildings were written is likely to shape the future pattern over the medium term and increased
accommodation models. These
development. to headcount and the new operating off as redundant status symbols of of office demand in favour of those demand for office space.
are predicated on their employees
The negative impact of prolonged practices that it decides to adopt. property developers with big egos requiring space for creative and
working from home on the basis
periods of working from home immediately after the terrorist attacks collaborative purposes. These
that they will be required to attend
on the mental health of some is on the World Trade Centre in New York are areas of business where the Tenants will be the key beneficiaries
the office on specified days to
also now well documented. Most The Death Of The Office Tower on 11 September 2001, on the basis application of AI is likely to be in the London office market over
participate in collaborative projects.
employers and employees alike Building? that no responsible employer would less effective. the next year or so but landlords of
The UK government, the Nationwide
are becoming increasingly aware Will office tower buildings become expose their workforce to such risks. good quality, well located, buildings
Building Society and outsourcing
of the importance of the office to increasingly unlettable? This was Since then key cities across the world will ultimately benefit from positive
firm, Capita, are just a few examples
promote social interaction, underpin a question that was put to me have seen new, and ever taller, tower More London Decentralisation returns over the medium term.
of major employers that have
personal wellbeing, productivity and, at a recent presentation on the buildings added to their skyline. London The BBC’s recent announcement that
recently announced a shift to more
ultimately, profitability. London office market. Certainly, is no exception – witness the recent it is to relocate up to 400 London
flexible operating models, based on
passenger lifts represent a significant completion of 22 Bishopsgate which, at jobs to the regions by 2027 comes a
employees working for a significant
“bottleneck” in tower buildings, 62 storeys, currently holds the record year after the Government unveiled
part of the week from home.
Structural Changes In Occupier if social distancing measures for the tallest office building in the City its plans to similarly relocate up to
This operating model may work
Behaviour are to remain the norm for the of London. 22,000 Civil Service jobs from the
well for some businesses but not for
The answer to the second question foreseeable future. I am aware of Despite depressed demand, energy capital over the next 10 years as part
all. Commodities trading companies
is not so clear cut and will ultimately two major international businesses company Dtek reportedly paid a record of its “Levelling-up” agenda.
that rely on very close co-operation
be influenced by the extent to that are currently reviewing their City rent of just under £110.00 per sq ft The impact of the decision of
and rapid exchange of information
which occupiers adopt new, post- real estate portfolios, with a view per annum for the 7,000 sq ft top floor both organisations to broaden their
between team members, and
pandemic, working practices. The to consolidating some of their in the 48 storey Leadenhall Building at investment in jobs more equitably
professional services businesses,
evidence that is gradually gathering, London and regional offices, and the end of 2020. It is therefore too early across the regions will, necessarily,
Michael Pain
including law firms, where junior Head of Tenant
as employers plan returning their both have stated that they will only to write off the traditional City tower be a phased process – recruitment
employees are required to “shadow” Representation Team
workforces to their usual place of consider ground and first floor building as a place to host businesses. and the procurement of suitable 07715 001013
more senior staff as an essential part
michael.pain@carterjonas.co.uk
1 2
RENTS AND SUMMARY OF
RENT FREE PERIODS FORECAST
MARKET TRENDS
Advertised Rents Advertised Rents Forecast During the remainder of 2021 the following trends are likely to become
Advertised rents for new more widely established in the London office market:
Table 1 – Forecast Decline, By Sub-Market, In Landlord’s Advertised Rents
and refitted Grade A space have ( To Q1 2022 )
remained largely unchanged since the
New and refitted mid-rise Grade A space over 5,000 sq ft
first quarter of 2020. However, it is Advertised Rents Office Vacancy
Sub-market Forecast Decline
likely that widespread reductions will • a decline in advertised rents of 10 – 15% • a rise in the vacancy levels of
begin to manifest themselves over the City of London – Bank, Leadenhall Street, Blackfriars, Aldgate 10.0 – 15.0% in the City of London, Docklands and previously occupied landlord-
next 3 – 6 months, dragged down by West London office markets by Q1 controlled space as some tenants
City Fringe North – Shoreditch, Clerkenwell, Farringdon 7.5 – 12.5%
increasing competition from tenant 2022 for both new and refitted space cease trading and disclaim leases
controlled space. Please refer to Table City Fringe East – Aldgate East, Spitalfields 7.5 – 12.5%
• advertised rents in the West End, • an increase in new Grade A space
1 which provides a twelve month South Bank – Southwark, London Bridge 7.5 – 12.5% Midtown, City fringes, South Bank vacancy as developments that
advertised rent forecast. and Stratford sub-markets are forecast were started during the 2018 / 19
East London – Canary Wharf, Crossharbour 10.0 – 15.0%
to decline by 7.5 – 12.5% over the construction cycle reach completion
East London – Stratford 7.5 – 12.5% same period • a continued rise in the quantum of
Rent Discounts & available tenant-controlled space,
Midtown – Holborn, Bloomsbury, King’s Cross, Covent Garden 7.5 – 12.5%
Rent Free Periods Rent Discounts as occupiers downsize and offload
West End – Mayfair, Marylebone, Fitzrovia, Soho, Paddington, Victoria 7.5 – 12.5% surplus accommodation
Ready fitted out, plug in and go, • T
he rent discounts that can be
• the emergence of the availability of
tenant-controlled space, that requires West London – Hammersmith & White City 10.0 – 15.0% negotiated on advertised rents are
new, previously unoccupied, surplus,
little or no capital expenditure on the Source: Carter Jonas Research
likely to stabilise at their current level
Grade A space being offered by
part of the incoming tenant, represents of 5 – 10%, reflecting the anticipated
tenants that, prior to the COVID-19
significant competition for landlords. widespread discounting of advertised
pandemic, entered into pre-letting
Landlords are responding by offering rents
Rent Free Periods agreements on buildings that were
longer rent free periods (see Table 2)
under construction
and deeper rent discounts of, typically, Table 2 – Comparison of Typical Rent Free Periods Q1 2020 vs Q1 2021 Rent Free Periods
5 – 10% on advertised rents. • a
further widening in rent free period
Q1 2020 Q1 2021 Office Relocation Activity
incentives
• a
gradual increase in the number of
City, West End, Midtown, South Bank, Stratford & West London
Ready Fitted Out Space – tenants that are facing break options
5 year lease 9 – 12 months 12 – 16 months Lease Length
A Challenge For Landlords and lease expiries proceeding with
10 year lease 20 – 24 months 25 – 29 months • c
ontinued demand for greater lease their plans to relocate – driven by a
Traditionally, landlord space has been flexibility – shorter leases and more
Docklands desire to downsize and / or move
offered on the basis that the incoming frequent break options
5 year lease 12 – 14 months 14 – 18 months
to higher grade office space that
tenant would fit the space out, at
reinforces employee wellbeing and
the tenant’s expense, to render it 10 year lease 24 – 27 months 26 – 31 months Downsizing ESG policies
operational for its particular purposes. Source: Carter Jonas Research • a
continuing trend towards businesses
However, an increasing number of
downsizing their real estate footprint, Serviced Offices
landlords are now fitting out vacant
reflecting the adoption of new
floor space speculatively with meeting • a
short term improvement in
operating practices and reduced
rooms, kitchen and reception area “LANDLORD’S ADVERTISED headcount, in order to reduce real
demand for serviced and co-working
facilities – in order to compete with RENTS FOR NEW AND estate costs
space from those tenants with lease
available ready fitted out tenant- REFITTED GRADE A expires and break options seeking
controlled space. SPACE ARE LIKELY TO The Bargaining Position of Tenants
to downsize and requiring “stop-gap
The trend towards landlords offering BE UNDERMINED IN THE accommodation” before a move
space to a “Cat A+” finish began COMING MONTHS AS • a
continued shift in favour of to more permanent space, until
before the pandemic, in response to COMPETITION FROM GOOD tenants in the bargaining position the business climate becomes
competition from serviced offices, QUALITY, READY FITTED in lease negotiations more certain
and is now being underscored by the OUT, PLUG-IN-AND-GO,
increasing availability of fitted out sub- TENANT-CONTROLLED
let space. SPACE INCREASES.”
3 4
“LANDLORDS ARE RESPONDING TO WEAK
DEMAND AND INCREASING OFFICE VACANCY
BY OFFERING DISCOUNTS OF, TYPICALLY, Table 3 – The London Office Market – Typical Landlord’s Advertised Rents Q1 2021
£ per sq ft per annum | space over 5,000 sq ft | UF= Upper Floors
5 – 10% ON ADVERTISED RENTS.” Location Grade A Grade B
New/Refitted Refurbished Refurbished
City
Prime – Bank, Leadenhall Street £62.50 – £75.00 £50.00 – £65.00 £40.00 – £49.50
(UF = £77.50 – £97.50) (UF = £67.50 – £85.00)
Secondary – Blackfriars, Aldgate £57.50 – £68.50 £45.00 – £57.50 £38.00 – £45.00
(UF = £70.00 – £85.00) (UF = £65.00 – £77.50)
City Fringe
North – Shoreditch, Clerkenwell £65.00 – £75.00 £55.00 – £65.00 £38.00 – £55.00
(UF = £75.00 – £90.00)
North West – Farringdon, Smithfield £70.00 – £85.00 £57.00 – £68.50 £40.00 – £56.00
(UF = £87.50 – £92.50)
East – Spitalfields £60.00 – £75.00 £48.00 – £60.00 £37.50 – £46.50
East – Aldgate East, Wapping £50.00 – £59.50 £38.00 – £48.50 £34.00 – £37.00
(UF = £60.00 – £69.50) GRADES OF OFFICE
South Bank ACCOMMODATION
Waterloo, Southwark, London Bridge £67.50 – £75.00 £52.00 – £66.50 £39.50 – £52.50
(UF= £76.50 – £92.50) (UF = £67.50 – £75.00) For marketing purposes office
accommodation is generally
Battersea, Nine Elms, Vauxhall £55.00 – £67.50 £45.00 – £53.50 £37.50 – £43.00
categorised into Grades which
East London
are defined as follows:
Docklands Prime £50.00 – £57.50 £32.50 – £42.50 £27.50 – £35.00
– Canary Wharf & Wood Wharf (UF = £58.50 – £62.50) (UF = £45.00 – £50.00)
Grade A
Docklands Secondary – Crossharbour £32.50 – £39.50 £27.50 – £32.50 £22.50 – £27.50
Space fitted with air
Stratford £45.00 – £49.50 £35.00 – £45.00 £22.50 – £29.50 conditioning & passenger lift
West End facilities & fully accessible
Central – Mayfair, St James's (Prime) £105.00 – £125.00 £85.00 – £105.00 £65.00 – £77.50 raised floors for data /
(UF= £130.00 – £140.00) telecoms cable management
Central – Mayfair, St James's (Secondary) £87.50 – £100.00 £72.50 – £88.50 £62.50 – £72.50
North – Euston £65.00 – £78.50 £55.00 – £65.00 £42.50 – £52.50
Grade B
North East – Fitzrovia £78.00 – £90.00 £63.00 – £78.50 £48.00 – £62.50
Accommodation that typically
incorporates under floor or
North West – Marylebone £78.00 – £92.50 £65.00 – £78.50 £50.00 – £62.50
perimeter trunking for data /
(UF = £95.00 – £110.00)
telecoms cable management,
South – Victoria, Westminster, Haymarket £72.50 – £85.00 £57.50 – £72.50 £45.00 – £55.00
(UF = £87.50 – £92.50)
rather than raised floors, and /
or air cooling facilities, instead
South West – Knightsbridge £82.50 – £95.00 £72.50 – £80.00 £60.00 – £70.00
of an air conditioning system
East – Soho, Regent Street, £82.50 – £97.50 £67.50 – £82.00 £50.00 – £66.00
Leicester Square
that dehumidifies & draws
(UF = £95.00 – £110.00)
fresh air in to the building
West – Paddington £70.00 – £78.50 £55.00 – £66.50 £42.50 – £52.50
(UF = £82.50 – £90.00)
Refitted space
Midtown
Accommodation where the
North – King’s Cross £72.50 – £87.50 £60.00 – £72.50 £47.50 – £57.50
entire building, including
South – Covent Garden £70.00 – £82.50 £55.00 – £69.50 £47.50 – £55.00
the common parts, has been
(UF = £83.50 – £88.50)
refitted and is “as new”,
East – Holborn £62.50 – £70.00 £52.00 – £62.50 £40.00 – £50.00
incorporating new building
(UF = £72.50 – £80.00)
services, including lighting, air
West – Bloomsbury £75.00 – £90.00 £60.00 – £72.50 £45.00 – £55.00
conditioning and passenger
South West London lift facilities
Chelsea £75.00 – £87.50 £62.50 – £72.50 £47.50 – £60.00
West London Refurbished space
Kensington £55.00 – £65.00 £45.00 – £53.50 £32.50 – £45.00 Premises where the existing
Hammersmith £52.00 – £59.50 £40.00 – £50.00 £35.00 – £42.50 building services have been
(UF = £55.00 – £57.50) overhauled, rather than
White City £45.00 – £55.00 £40.00 – £45.00 £32.50 – £40.00 replaced with new systems
Chiswick £47.50 – £55.00 £37.50 – £46.00 £32.50 – £37.50
Ealing £40.00 – £50.00 £36.50 – £42.50 £29.50 – £36.50 Source: Carter Jonas Research
5 6
THE LONDON
OFFICE MARKET HACKNEY
STRATFORD
The London office market is formed of a series of
sub-markets each having quite different supply and demand
dynamics, which are reflected in the differing levels of rent
and rent free periods that characterise each location.
ISLINGTON
Office Occupancy Costs
BOW
Table 4 of this document provides a summary of the typical
rent, business rates and service charge occupancy costs KING’S CROSS
associated with each sub-market for new and refitted,
mid-rise, Grade A office space over 5,000 sq ft. SHOREDITCH
EUSTON
CLERKENWELL
Rent Free Periods
CLERKENWELL
Table 2 of this document provides a summary of typical rent
free periods for 5 and 10 year leases, by sub-market. BLOOMSBURY
FARRINGDON
FITZROVIA LIVERPOOL STREET
WHITECHAPEL
MARYLEBONE SPITALFIELDS
PADDINGTON HOLBORN CITY OF
LONDON
POPLAR
SOHO
COVENT
GARDEN ALDGATE
MAYFAIR EAST
ST JAMES’S SOUTHWARK CANARY WHARF/
WOOD WHARF
SUB-MARKETS & POSTCODES LONDON
BRIDGE
WATERLOO
West End W1, W2, SW1, NW1
Midtown WC1, WC2, Part N1/EC1/EC4
City EC2, EC3, Part EC1/EC4 CROSSHARBOUR
City Fringe North Part EC1/N1 WESTMINSTER
City Fringe East E1, E2
South Bank SE1, SW8
London Docklands E14
VICTORIA
Stratford E15, E20
Elizabeth Line/Crossrail route
CHELSEA
Denotes National Rail station
GREENWICH
ELIZABETH LINE ROUTE
MAIDENHEAD EALING
SLOUGH
BATTERSEA
READING
HEATHROW
FULHAM
CLAPHAM
PUTNEY 7 8
PRINCIPAL OFFICE SUPPLY AND DEMAND
The principal annual outgoings
associated with occupying multi-let
OCCUPATION COSTS
office space are rent, business rates and
building service charge.
Table 4 provides a comparison of the
typical rent, business rates and service
charge costs associated with mid-rise
new and refitted Grade A office space
Office Vacancy Continues To Rise Protecting The Workforce
over 5,000 sq ft, located in each of the
key Central London office sub-markets. During the first quarter of this year, the Recent Carter Jonas Research
volume of Grade A tenant-controlled shows that employers are acutely
office space being brought to the aware that if they are to succeed in
market by those businesses eager to reassuring their workforce that it
Table 4 – Comparison Of Rent, Business Rates and Service Charge Costs By Sub-Market – Q1 2021 reduce their exposure to real estate is safe to return to the usual place
Typical costs per sq ft per annum for new and refitted mid-rise Grade A space over 5,000 sq ft costs has continued to rise. This trend of work, they must offer a bright,
Sub-market Rent Business Rates Service Charge Total is likely to continue for attractive, vibrant work environment
the rest of the year, adding to vacancy in a building with an air conditioning
City of London – Bank, Leadenhall Street £70.00 £28.00 £11.50 £109.50
levels across London and offering system that, fundamentally, underpins
City Fringe North – Shoreditch, Clerkenwell £68.50 £22.00 £11.00 £101.50 footloose tenants more choice and the wellbeing of their employees and
City Fringe North – Farringdon £85.00 £23.50 £11.00 £119.50 a stronger bargaining position in provides protection against the spread
lease negotiations. of COVID-19.
City Fringe East – Aldgate East £56.50 £21.00 £11.00 £88.50
City Fringe East – Spitalfields £65.00 £24.00 £11.00 £100.00
The Impact Of The Serviced Office An Increasingly Environmentally
South Bank – Southwark, London Bridge £72.50 £24.50 £11.50 £108.50
Sector On Office Vacancy Aware Business Community
East London – Canary Wharf £52.50 £17.25 £16.25* £86.00
During the last few months reports The flight to quality office space
East London – Crossharbour £35.00 £12.50 £12.00 £59.50 have increased indicating that the is a trend that has continued to
woes of the co-working and serviced gather pace during Q1 2021 and is
East London – Stratford £47.50 £12.50 £10.00* £70.00
office sector are far from over. Most being underpinned by an increasing
Midtown East – Holborn £70.00 £28.00 £11.50 £109.50 recently, serviced office operator IWG desire by businesses to demonstrate
Midtown West – Bloomsbury £85.00 £31.25 £11.50 £127.75 is understood to have notified the their “green” credentials by moving
landlords of the twenty plus office to buildings that are energy efficient,
Midtown North – King’s Cross £85.00 £32.00 £11.00 £128.00
buildings occupied in London by its have a low carbon footprint and
Midtown South – Covent Garden £77.50 £32.25 £11.50 £121.25 “Spaces “ brand that it will require its have been constructed from
West End Central – Mayfair, St James’s £110.00 £52.00 £12.50 £174.50
tenancies to be restructured or else be sustainable materials.
forced to disclaim leases.
West End North – Fitzrovia £92.50 £35.95 £11.50 £139.95
Landlords could therefore be facing
West End North – Marylebone £95.00 £40.50 £11.50 £147.00 the prospect of no rental income and
the need to find replacement tenants
West End South – Victoria, Westminster £77.50 £35.25 £11.50 £124.25
in a market characterised by weak
West End West – Paddington £77.50 £26.00 £11.50 £115.00 demand. Defaults in the serviced office
West End East – Soho £92.50 £40.50 £11.50 £144.50 sector are therefore likely to increase
vacancy levels of landlord-controlled
West London – Hammersmith £57.50 £22.50 £10.50 £90.50
space, adding further to the total stock “THE FLIGHT TO
West London – White City £52.50 £18.75 £11.00 £82.25 of vacant office space across London. QUALITY OFFICE
SPACE CONTINUES AS
South West London – Battersea, Nine Elms £62.50 £21.00 £10.00 £93.50
EMPLOYERS RECOGNISE
Source: Carter Jonas Research The Flight To Quality Continues THE IMPORTANCE
OF CREATING AN
The first quarter of 2021 has witnessed
Please refer to the map overleaf which illustrates the various London office ATTRACTIVE WORK
an improvement in the turnover of
sub-markets. “IN A WORLD WHERE ENVIRONMENT THAT
lettings in the London office market
PROFITABILITY IS UNDER REINFORCES EMPLOYEE
Notes THREAT, BUSINESSES (see table 5), from a very low base, WELLBEING. THIS
• Rents are typical landlord’s advertised rents and exclude the value of rent ARE BECOMING as some occupiers take advantage TREND IS BEING
free periods INCREASINGLY of break options or lease expiries to UNDERPINNED BY THE
CONSCIOUS OF downsize and / or trade up into better NEED FOR BUSINESSES
• Business rates cost estimates include the Crossrail levy
THEIR REAL ESTATE quality space. TO DEMONSTRATE THEIR
• * includes estate charge OUTGOINGS WHICH Very significantly, the majority of “GREEN” CREDENTIALS
• Total costs are estimates and exclude building insurance and utilities costs TYPICALLY FORM THE lettings that have taken place during BY MOVING TO
• Rents for the upper floors of tower buildings will command a premium of
SECOND HIGHEST Q1 2021 are of new and refitted Grade BUILDINGS THAT
circa 15 – 25% above those illustrated in the table
OPERATING COST AFTER A space, rather than low cost, lower HAVE A LOW CARBON
SALARIES.” quality, floorspace. FOOTPRINT.”
9 10
KEY LEASING
TRANSACTIONS DURING
Q1 2021
The turnover of lettings in the
London office market is at historic
lows, reflecting the current economic
climate, with much of the letting
activity confined to the sub 25,000
sq ft market segment – in sharp
contrast to market trends a year
earlier. The table below provides
a summary of key Q1 2021 lettings
over 10,000 sq ft.
Table 5 – Key Office Lettings Over 10,000 sq ft – Q1 2021
Sub-market Tenant Business Sector Property Floor Area (sq ft)
City of London Donnelly Financial Financial services 138 Cheapside, EC2 10,007
HKA Business services 100 Victoria Embankment, EC4 10,150
Plexus Law 40 Gracechurch Street, EC3 12,970
J M Finn Financial services 25 Copthall Avenue, EC2 26,500
International Dispute
Business services 100 St Paul’s Churchyard, EC4 46,250
Resolution Service
AllianceBernstein Financial services 60 London Wall, EC2 52,800
Latham & Watkins Law 1 Leadenhall Street, EC3 200,000
North City Fringe – Farringdon TikTok Information Technologies Media / Technology Kaleidoscope, 4 Lindsey Street, EC1 88,500
Midtown – Covent Garden MSQ Partners Media / Marketing 34 Bow Street, WC2 20,315
Midtown – Aldwych Forrester Business services – research 61 Aldwych, WC2 17,702
Midtown – King’s Cross Gyroscope Therapeutics Biotechnology Rolling Stock Yard, 188 York Way, N7 23,800
Source: Carter Jonas Research
“THE TURNOVER OF LETTINGS ACROSS THE LONDON OFFICE
MARKET IS LIKELY TO REMAIN LOW DURING 2021 REFLECTING
THE UNCERTAIN ECONOMIC CLIMATE AND THE DESIRE OF
SOME BUSINESSES TO EXTEND EXISTING TENANCIES TO
CONSERVE WORKING CAPITAL, RATHER THAN EXPENDING IT
ON A CASH-HUNGRY OFFICE RELOCATION.”
11 12THE SERVICED OFFICE & CENTRAL LONDON –
CO-WORKING SECTOR INVESTMENT OVERVIEW
Why Move To Serviced & • Short form service agreement that The Central London investment bidding process. In the end Lever
Co-working Space? can be issued and signed within a market has remained relatively Street sold to Merseyside Pension
For those occupiers facing an imminent matter of hours – no complicated, subdued during Q1 2021. This Fund and Broadway is at the
lease expiry or break option there is lengthy, real estate lease requiring has been caused, in the main, time of writing going through a
certainly merit in considering serviced the advice of a real estate lawyer by a lack of available buying bidding process. Also of interest
and co-working space, particularly as a opportunities rather than a lack in the market is the Scouts’
• No stamp duty land tax payable of investor demand. The general Association Baden-Powell House
short-term stop-gap measure, pending
on the grant of the service perception in the market is that in South Kensington, offering a
a later relocation to longer-term,
agreement there is significant pent up buyer wide variety of end uses such as
conventional, office space, when the
economic climate is a little more certain. appetite from both UK and residential, educational and hotel.
However, serviced / co-working office
overseas investors as they await It is understood that at least 40
space is not suitable for all businesses,
a combination of the easing of separate parties have expressed
especially those that require a high
Serviced / Co-working Office travel restrictions and increase in interest and the bidding process
degree of data security such as private
Space – The Pros & Cons availability and deliverability of should demonstrate a broad
client wealth managers and law firms,
good quality assets. spectrum of investor appetite.
The key advantages of serviced / co- or those businesses that wish to stamp
Having said that, there has Looking to the future, buyers
working office space are that it is “cash- their own brand on their office space.
been some, principally ‘off are generally feeling bullish about
flow friendly” and offers a high degree
market’, activity in both the West the prospects for an economic
of lease flexibility – enabling a relocation
End and City. In excess of £650 recovery in a relatively short
to more permanent accommodation to
million has been transacted in time frame. The success of the
be effected at short notice.
“LEASING ACTIVITY IN those combined markets during vaccination programme and the
In detail, serviced / co-working space
offers the following advantages: THE SERVICED OFFICE February and more completions ongoing roadmap out of the
SECTOR HAS IMPROVED are expected before the end of lockdown offer genuine reasons
• Ready fitted out with data / DURING Q1 2021 AS the Quarter, albeit volumes are for optimism to occupiers and
telecoms infrastructure and SOME OCCUPIERS WITH generally around 50% down on investors alike and should enable
furniture – therefore little or no LEASE BREAK OPTIONS the same period last year. Those a swift return to relative normality
capital expenditure required AND EXPIRIES ON few sales that have been openly in the office sector. In terms of
CONVENTIONAL SPACE marketed, such as Amshold’s investment, best in class assets
• A quick, plug in and go, PAUSE TO REASSESS Lever Building in Clerkenwell and will remain the profile of choice,
accommodation solution THE IMPACT OF THE Tellon’s 40 Broadway development particularly those assets with
PANDEMIC ON THEIR site have attracted strong levels robust income, although there will
• Typically no dilapidations BUSINESSES BEFORE of interest, although only UK and continue to be interest in value-add
/ repairing / exit costs – a COMMITTING TO LONGER- overseas buyers with a presence situations where the underlying real
contribution to which is usually TERM LEASES ON NON- in London have realistically estate fundamentals are strong.
reflected in the rent payable SERVICED SPACE.” been able to engage fully in any
13 14THE TENANT
KEY CONTACTS
REPRESENTATION TEAM
Michael Pain Partner
Head of Tenant Representation Team
Our tenant representation services include: 07715 001013
michael.pain@carterjonas.co.uk
• S
erviced & co-working • Relocation budgeting Justin James Partner
property searches and & planning London Office Investment Team
negotiations • L
ease & rent 07971 529508
justin.james@carterjonas.co.uk
• B
reak option linked lease review negotiation
re-negotiation • Repairs/dilapidations cost Daniel Francis Head of Research
• W
orkplace design & assessment & negotiation 07801 666137
floorspace re-configuration • B
uilding, air conditioning daniel.francis@carterjonas.co.uk
• M
arketing & leasing services – & passenger lift surveys
surplus space Ed Caines Associate Partner
• B
usiness rates analysis
07966 188632
• C
onventional office space & appeal ed.caines@carterjonas.co.uk
search & cost appraisal • Service charge audit
• Office move management Georgia Eckert Associate
07826 884704
georgia.eckert@carterjonas.co.uk
For more data on the London office market, office availability,
rents & rent free periods, market trends & information on Anders Horwood Surveyor
budgeting & planning for a lease renewal, rent review or office 07836 246049
relocation please contact one of the team. anders.horwood@carterjonas.co.uk
One Chapel Place, London W1G 0BG
OUR EXPERIENCE 17,500 sq ft
Lease negotiations and relocations 10,000 sq ft+ Hackett Limited
The Clove Building, SE1
43,000 sq ft
UK Payments Administration 16,000 sq ft
2 Thomas More Square, E1 Circle Housing
Two Pancras Square, N1
39,000 sq ft
Care Quality Commission 15,000 sq ft
151 Buckingham Palace Road, SW1 Hitachi Rail Europe
40 Holborn Viaduct, EC1
28,000 sq ft
Warner Bros/Shed Media 11,000 sq ft
85 Grays Inn Road, WC1 Salamanca Group
50 Berkeley Street, W1
27,000 sq ft The data in this document is provided to illustrate the key trends in the
London office market. We recommend that the advice of an experienced
Reinsurance Group of America property consultant is sought where a specific property transaction is
22 Bishopsgate, EC2 being contemplated before any irreversible decisions are made.
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