Commercial Blog May 2018 - Colliers International | London

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  1. May 2018

  2. Mic on Mondays | Neil Usher

    21 May 2018
    Neil Usher is an Executive Consultant at Unispace, a global leader in business interior design and commercial interior design. With 25 years’ worth of experience in the sector, Neil joins us to talk about workspace strategy and his new book ‘The Elemental Workplace’ which he has written on his ideas and knowledge

    Where do you see flexible space going as it relates to more corporate space – and where will it likely settle?

    As occupiers we have been craving flexibility for many years, so it is really refreshing to see so many new entrants in the market. I think we are seeing some really interesting, more niche players and more bespoke space emerging; rather than just flexible space on mass. I think we are likely to see corporate occupiers having a core lease, branded space, the way they have done for many years. Then with concentric rings of steadily increasing flexible space around this core, to account for the changes within their business and their merger and acquisition activity. This is similar to the Skunk Work projects in the 1950s. Sometimes we think some of these things are new, but I think corporates will end up with a portfolio of space that is a mix of the two.

    Do you foresee the Real Estate sector softening its corporate image similarly to how we have seen the evolving City workspace? 

    I think we are seeing an increasing amount of informality in a lot of things we do. I have seen some fairly traditional property firms, not just lose the ties but the suits as well. There is definitely a growing level of comfort with informality. A lot of that is determined by new entrants to the market, their whole approach is less formal than traditional property firms have taken. It is all from the good and I think it has created a really interesting mix.

    What key elements were addressed during the transformation of workplaces at Sky, Rio Tinto, Honeywell and other places you have worked?

    It has been a 20-year journey, so I think they have really changed in that time in terms of their outcome. However, in essence they are a series of commonalities to all of them. Fantastic technology; obviously appropriate to the time and as future-proofed as possible. The best possible range of amenities to support the workspace. In terms of the workspace itself, increasing sophistication of alternative settings, in addition to the primary desk space settings we usually see. There is a real focus on providing for service, designing for service, designing from the inside out has been a big theme of mine for many years. So, the combination of all of those has been common, right back to Warner Bros. days, right through to the last projects at Sky. I think we have just got more sophisticated in dealing with the outcomes and designing the space. As well as more sophisticated in understanding the relationship between the amenities and the work space, and I think the range of amenities has been ever increasing as well. Those are the most common themes I have seen throughout my career really.

    What exciting projects are you currently working on with Unispace?

    I think we have really seen a degree of diversity in the projects we are undertaking. It used to just be corporate fit outs, so end occupiers looking to fit out a more corporate space. However, now we are doing a lot of work with developers and co-working operators. The richness and the range of projects is increasing all the time.

    What is also interesting is in areas like education, compared to areas like corporate space, some fantastic blurring of boundaries and learning between the two. As corporates look to take the best of educational environments and educational establishments are looking to learn from corporates. I think what we are seeing in all of the work we are doing is the breaking down of barriers between very modular and enclosed types of space, now we are just talking about space in a more general way. The old sectors with their old way of doing things, it is all breaking down. Which is making life incredibly interesting across the board. I think we are going to see more of that, we are going to see more cross fermentation of ideas and learning from each of those.
     

    Lastly as a leading voice debating the way employees deserve to be treated within their workplaces- how would your ideal workplace look and feel?   

    These things are all entirely personal, but it would probably be very crisp and clean, uncluttered, simple. I am a great believer in keeping things simple and then allowing human beings the space they need to express themselves. It would be warm, accessible, intuitive, but most of all it would have to work. A primary focus of a workspace is to enable people to be the best they can be every day, to do their jobs, to do their work. So the workspace itself has to be highly functional and we have to start with that as the basic premise. It is important as well to allow people to influence their surroundings as well, so make it possible to adapt their surroundings to the way that they want to work.

  3. Crisis? What crisis?

    15 May 2018
    The incidence of pre-letting - where occupiers commit to taking newly developed space ahead of its completion - is considered to be a good metric regarding the vitality of any property market.

    On that basis, the Central London office is enjoying robust health at present. Our analysis of the first three months of this year, shows that pre-letting activity was considerably above trend (+40%) with five separate deals in excess of 50,000 sq ft.
    Even in the City, which has the highest vacancy rate of all the central London office markets, pre-letting activity has seen more than 1m sq ft taken up in the past six months as occupiers, such as SMBC, Sidley Austin and Mimecast have locked in.

    Meanwhile, non-core locations continue to drive the absorption of built space with Farringdon, Shoreditch and Holborn all seeing a rise in occupation levels. Grade A supply in Farringdon has dwindled to near zero, with City Fringe Grade A availability down by 25% between Q4 2017 and the end of this March.

    When property supply dwindles, rents have a tendency to go up.  Accordingly, overall headline office rents across London rose modestly across Q1 by about 1% on average, but this still represented the highest positive movement for more than two years. Top West End rents rose to £120 per sq ft, reaching an 18-month high. City Fringe locations also saw prime rents head above £70 per sq ft – in excess of the City core benchmark of £68.50 per sq ft.

    So is everything in the garden rosy? Well, not entirely.

    The impressive pre-let figures and modest vacancy levels mask the fact that the demand for secondary offices is extremely thin. There is a widening gulf between appetite for Grade A space and lesser quality product. Canary Wharf has seen a steady downward trend in occupation levels since the start of 2016 and the release of secondary stock across London.  All Grade absorption continued to be held back by non-Grade A stock, as well as the vacating of built stock, now earmarked for redevelopment.  

    However, the release of used offices onto the market is now slowing dramatically. In Q1, the supply of secondhand space rose by just 0.2% quarter-on-quarter – which is in stark contrast with the 19% jump in Q1 2017 when business was running scared from the referendum result.

    So looking ahead, we expect demand for office space is consistent - further major London office lettings are anticipated – and we should see a continued stabilisation in vacancy levels, aided by dearth of new speculative supply. Demand for office space is consistent, with further major lettings anticipated for Q2 2018. 

    However, the spectre of Brexit still looms over the market. Uncertainty, while having diminished, still remains a concern for occupiers and expansion plans. 


    The Author

    Guy Grantham
    +44 20 7344 6793
    +44 779 596 3710
    Guy.Grantham@colliers.com
  4. Mic on Mondays | Paul Mellor

    14 May 2018
    Mellor and Smith is a London design agency that takes risks. Having taken residence in the newly refurbished 81 Southwark St, SE1 they have proved to be a quirky tenant in the building! Read this blog or watch Design Director, Paul Mellor, speak about creativity and why the days of minding your language are over.

    Congratulations on the new office, hopefully you have some kind things to say about our city office guys?

    Out of the 12,000 staff at Colliers all over the world, I think Alfie John and Oliver Hawking are definitely the best in the world, we love them.

    Can you give us an insight into what Mellor and Smith do and the reasons behind choosing this office.

    So the best ideas come when we get round a table, we get the pens and paper out and just start scribbling. The ideas really start to flow at that point. In order for that to be at its best, we need more space. Thanks to Colliers we were able to find a really good space, twice the space we had before. This means we can get away from our desks, our emails, messages and all that stuff.

    The Real Estate industry is often criticised for being risk adverse and traditional, what attitude would you encourage professionals to adopt?

    It doesn’t really matter what industry you are in, all the different brands within a sector are all pretty much the same – they’re all pretty much vanilla. The best approach is to be different, if you are different you will be memorable and if you’re memorable you will sell more of what you are selling. Therefore, you need to take a risk.

    We’ve had Twitter, Instagram and LinkedIn, what do you think is next for the digital world? 

    I don’t understand why people are so obsessed with what is going to come up in the future. 89% of advertising in the present day doesn’t work, so why are they so obsessed with the future and can’t even get the house in order right now. Stop obsessing about the future and make what you do today better.

    Your website takes no prisoners in terms of language and attitude, do you think the age of minding our language is over?   

    Who cares about language, it’s only a swear word. What is more important is the ideas you come up with, the skills that you have, the ability to be smart and creative. I’m way more interested in ideas and creativity, than someone ticking a box because they don’t swear.

  5. Does Help to Buy work in the London market?

    1 May 2018
    Across the UK, the government’s Help to Buy (HTB) initiative has played a part in driving the number of people buying a home for the first time to its highest level in more than a decade. But is it having a positive effect on housing supply in London?
    Whilst HTB encourages demand, the Government has also put a handbrake on buy-to-let buying through removing mortgage tax relief, increasing stamp duty and requiring portfolio stress testing. The buy-to-let market is a critical catalyst for the creation of new housing in the capital as investors are generally more willing and able to commit to purchasing a unit far earlier in the lifecycle of a development, thereby meaning that the banks will commit to funding housing projects.

    This is the sort of new development which also suits first-time buyers but schemes which are eligible for HTB can only be marketed to buyers nine months prior to the completion of a development. The catch is that developers will only push the construction button on schemes if they have enough pre-commitments and these need to be secured a long time before completion is only nine months away. So if buy-to-let investors are being driven out of the new homes market and HTB buyers can’t commit to schemes that are not under construction then the effect on supply is clear.

    In this context, it’s perhaps no surprise that new housing supply in inner London seems to have peaked in 2017 and the supply of new stock in this key market is now likely to rapidly reduce. The number of new constructions starts in 2017 - a principal measure of new supply - was 35% down than the corresponding level in 2015.

    For first-time-buyers to have the opportunity to access the capital’s housing market, the government must recognise that the rest of the market is being hampered by tough policies on investors. Despite there being no restrictions on first-time-buyers purchasing many years from completion, none of them actually do. It's the investors who are often the first to commit off-plan and are effectively the trigger for construction to begin on a project. It’s a catch 22 that needs to be addressed. 

    Author:
    Director - Residential New Homes

  6. French revolution: exploring the emergent co-working scene in Paris

    1 May 2018
    While London is awash with serviced offices and shared workspaces to suit all budgets, locations and designs, whip over to Paris and you’ll find a much smaller scene.
    WeWork is now a global brand and has 6 locations in Paris with another few already in the pipeline. Compare this to its 35 locations in London and you get a fairly accurate snapshot of the different stages in development of the co-working scene in each city. 

    WeWork’s Paris locations deliver everything we’ve come to expect from one of the world’s major players with its signature of exposed services sprayed white, wooden floors, beer taps and crittal style partitioning drawing the Paris creatives in droves.

    Over at Kwerk, however – a newer, younger operator opened in 2015 by former hospitality specialists– our eyes were opened to a remarkable luxury take on the co-working model.

    Kwerk operates out of 4 Paris locations and we visited the Kwerk Haussmann building on Rue de la Courcelles in the city’s 8th arrondissement. The 45,000ft2 shared-workspace is about 1km directly east of the Arc de Triumph along Avenue de Ferdinand, and about 600m north of the Franklin D Roosevelt intersection on Avenue de Champs-Élysées.

    Kwerk is very much a premium brand with a niche offering and extraordinarily beautiful facilities. If we say that Chanel has taken an entire floor here you should have some idea of the standard in detail and design.

    Dark stained floorboards run throughout, while Bonsai trees and plants fill the open plan café area. The contemporary furnishings and accessories are exquisite and it is perhaps the calmest vibe I’ve ever encountered at a co-working building.
    Annual memberships costs work out to €960 per month per desk for companies taking 12 desks or more, increasing to around €1,000 for smaller firms around 2-4 desks. Health and wellbeing are paramount, with each workstation adjustable in height and a choice of chairs with different lumbar supports.

    This focus continues effortlessly across the communal spaces and facilities. A beautiful Zen garden has a chilled soundtrack of music, birds and flutes, and workers can also make use of 3 roof terraces, a meditation room, yoga & Pilates studio, 500ft2 gym and self-defence classes from ex air force and mi6 agents. The shower facilities and plush towels continue the spa-like vibe. 

    It isn’t just London that is seeing such an increase in demand. Serviced office take-up across the UK continued to gain momentum throughout 2017 with 2.9 million ft2of serviced offices by the end of 2017 which portrays a 157% increase from the previous year.  

    The old way of working is no longer relevant in today’s workplace. Colliers Tenant Representation team have both specialists in conventional offices, and flexible workspace. If you are looking to explore your options give Sophie Higgins or Mark Bott a call on 0207 101 2020. 

    The Author

    Richard Silver
    020 7101 2020
    07980 205 293
    Richard.Silver@colliers.com
  7. April 2018

  8. The Thackeray Effect

    30 April 2018
    Once almost entirely the domain of the insurance sector, The City’s EC3 postcode is fast undergoing a shift in demographic through a series of creative workspaces. Leading the way is The Thackeray Estate’s remarkable refurbishment and repositioning of a collection of buildings just moments from Monument station.
    The Eastcheap Estate consists of numbers 25, 33 and 39 Eastcheap - all Grade II or Grade II* listed - in a concentration of some of the The City’s most arresting Victorian Gothic facades.
     
    The three buildings were taken to the market in phases, culminating in the launch of 33 Eastcheap, which completed in February 2018. Behind the scenes, Colliers London worked alongside The Thackeray Estate and architects Trehearne to deliver a unique mixed-use scheme that is the first of its kind in the district. 
     
    Beyond their elegant exteriors, the office spaces within deliver a specification that purposely strays from the typical local offering of CAT-A and suspended ceilings. Instead, the heritage and original fabric of the buildings are highlighted with wooden plank flooring, exposed brickwork, new double glazed sash windows and detailed columns. Augmenting this modern classic aesthetic are raised metal tile floors, VRF air conditioning and fibre optic cabling.
     
    Amenities within the buildings include a newly remodelled and manned reception, new 8 person passenger lift, and new WCs and showers.
     
    The conscious breaking free from an established norm has opened the doors to a wider audience and new sectors, with the leasing campaign generating significant interest. In just 6 months, Colliers London successfully completed 6 deals at some of the highest rents on record for smaller units in the City. Occupiers include V&P Global Ltd, LaLive, Olympic Agencies, DGA, National Associate of Commercial Finance Brokers, and Trafalgar Capital Management. 
     
    Such is the success of The Eastcheap Estate that only 1 unit remains available at number 25 comprising 2,342ft2 at £65.00 per ft2; while at number 33, a third floor space of 1,437ft2 and a duplex 4th & 5th floor unit of 2,284ft2 with a private terrace, both at £69.50 per ft2.
     
    With its new combination of retail and office occupiers, The Eastcheap Estate has ignited the rejuvenation of this part of the City. And with an evolving crossover appeal including further new arrivals like The White Chapel Building and The Minster Building, it's clear that The Thackeray Effect is only just the beginning.
     
    To discover how The Eastcheap Estate could work for you or your client,  contact Natalie Lelliott and Alfie John at Colliers City on 020 7487 1900, or Shaun Simons and Oliver Jay at Colliers City Fringe on 020 7101 2020.

    The Author

    Natalie Lelliott
    02074871853
    07702975683
    Natalie.Lelliott@colliers.com
  9. Calling Global Investors - It's time to change

    27 April 2018
    When the bloodied Crusaders returned to England from the Holy Land in the 12th Century, they brought back a marvellous new design. Castles with round towers were more difficult to attack so the “Norman Way” of Square Towers was abandoned… When John Nash designed the Royal Pavillion in Brighton in 1822, its exterior was based on Mughal architecture… When Olympia and York first started Canary Wharf…
    Yawn, I know – but the point I am trying to make is that the copying of ideas and experiences in property design has been going on throughout the world for centuries. 

    But the 21st Century has seen travel become easier and cheaper, so knowledge and education has migrated further. And with this shrinking of the world, and along these base conduits of knowledge and education, we have seen capital flow. Indeed today with global quantative easing and the search for return, this trend is continuing at pace.

    So in London, we have seen the redevelopment of White City (Canadian/Japanese capital), The Shard and One Hyde Park (Middle East capital) as well as of course the development of Battersea Power Station (by Malaysian Group), first redundant almost some 40 years ago. We have also seen Korean, Chinese, Malaysian, Hong Kong, Taiwanese and Middle Eastern investors all surge into buying “income deals” and it is this kind of transaction that causes me concern.

    Why ?

    The point is that all this global capital has been needed to ensure London has turned into the global centre it has become. However, further capital will be needed to sustain and improve it. Therefore these “income investors” need to understand that cash will be needed to maintain the quality of buildings to attract tenants and ensure future cashflows are maintained. It needs to understand the rent review process in the UK, the application of service charges and the need to change design and upgrade buildings to meet the current, and ever changing needs of occupiers…

    “Erm, yes”, said a Global Institutional Investor, “but with a triple net lease, all I do is collect rent…”

    “Yes, but you need to manage buildings if you are to drive performance and you need the right people to do that…”

    “Why, I have a lease for 10 years to The UK Government and a shop where the rent is let at a market level for another 10 years.”

    “Yes, but rental markets move and you have a rent review on that shop so now your income will increase…”

    Sounds silly I know but the last quote is a true story. 

    Whilst capital has flowed along the educational conduit that is the value of London real estate, it would appear that knowledge about “holding” London real estate has not. When income is there, a passive investor sits and collects rent but they need to be planning what next. Recent market cycles have made investors lazy to invest capital in sustaining extra returns as yield improvement has made any historic transaction instantly profitable.

    In the old days before email, buildings had 25 year leases. This was particularly true when the German Open Ended Funds surged into London buying income and then selling before they would have to deal with extra capital needed for refurbishment and releasing. Property was seen as a Bond and the credit rating of the tenant was key and investors had time to wait to sell.

    Today, global investors account for 79% of the London market and have averaged 60% of the transactions undertaken over the last 20 years. At the same time, average lease terms in London have shrunk from 12 years 20 years’ ago to 5.5 years in 2018.

    Which means that most significant London buildings are owned by non-resident owners, and these assets will be attracting shorter lease terms in the future. Not a disaster given the length of leases in other global markets and there are exceptions to every rule!

    Now some of this capital is “educated in the needs of global tenants” but a worrying trend is of investors who fail to understand the need to inject capital to improve buildings or indeed asset manage them to drive rents. 

    Some sadly are simply looking for an investment return which is understandable when they are so far away.

    But, they run the huge risk of asset depreciation, as tenants get disenchanted with the withering quality of the building caused from a lack of capital expenditure or, at its worst, poor asset management. As ever, tenants are central to any property performance.

    And today, London also faces a fresh idea from the West – We Work – although some would argue the serviced office sector has been around for some time. Irrespective of that, we have a surge of serviced office companies in London trying to attract tenants on shorter leases but giving them quality and well-maintained buildings at a competitive price.

    So in short the days of passive management have gone. The best way to protect against a downturn is to get “your hands dirty”. “An Englishmen’s home is his Castle” but where he will work, will depend on the quality of his landlord. 

    The Author

    Andrew Thomas
    +44 20 7487 1649
    andrew.thomas@colliers.com
  10. The White Company relocates to White City Place

    25 April 2018
    The Colliers Occupier Advisory Team has just acted for The White Company in acquiring a new UK headquarters at White City Place for the home textiles retailer.
    Having now traded for over 23 years, The White Company has carved out an enviable and impressive niche for itself. As well as embedding its brand into people’s minds as their first thought when it comes to home textiles, and despite being a large international business, the company has retained a strongly approachable and ethical image and a reputation for being not only upmarket, but also good value – that’s not a combination easily managed.

    Relocating from its former HQ at 1 Derry Street, just behind High Street Kensington tube. The White Company’s new home is an entire floor of the building known as 2 Television Centre and extends to some 32,000ft2, which completed in April 2018. 

    White City Place is, of course, the regeneration by developers Mitsui Fudosan and Stanhope of the former BBC Television Centre into a significant place-making scheme. Restaurants, retail space and offices, along with a new Imperial College London campus, are set around a central avenue with gardens and a square, with the collection of buildings reimagined by the RIBA award-winning architects Allies Morrison. The development will also increase the size of the neighbouring Westfield shopping centre into the largest in Europe.

    Inside the remodelled television centre, the list of amenities and architectural detailing is seemingly endless, but highlights include a 40m high central atrium with a café, breakout and seating areas below elevated walkways that run overhead and connects the different floors and businesses. Also on site are a three-screen cinema and the latest London location of member’s club Soho House including a 47-room hotel with accompanying pool, fitness studios and gym.

    The Author

    Alex Kemp
    02074871713
    07881610962
    alex.kemp@colliers.com
  11. Mic on Mondays | Steve Moore

    23 April 2018
    Steve Moore is one of the Founders of the social darts experience, Flight Club. With two venues in London, Flight club promises a social experience like no other.

    Steve chats to us about where the idea came from, their new technologies and what makes their competitive socialising concept so successful.

    How did the idea for Flight Club come about?

    Me and my friend Paul were in a cosy pub in Devon on a rainy day. We saw about 12 people, boys and girls, going crazy over a ridiculous game of darts. We realised at that point that this had disappeared from a lot of places in the UK. So we challenged ourselves on that spot to bring it back.

    What do you think makes Flight Club so successful?

    The fact it’s got such broad appeal. What we did with the gaming and how me made everything easier with the automatic scoring, everyone can play it and play it well. There are a lot of familiar faces as well, which I think is really sweet. It’s not just a one off novelty, which some things are. People first come in, not sure if they will like it, then they play and get addicted to the game. This is the biggest thing for me, especially in London, as people often only do things once.

    What is the future for Flight Club and competitive socialising?

    So, I think the future for Flight Club will be about harnessing this amazing first moment we have had in social gaming. We have integrated into hospitality and it’s gone really well. Then we will try our hardest to translate that into different markets in the UK, like Manchester and Bristol. Flight Club has been so well received from all the reviews on Facebook, Google and Trip Advisor, we are absolutely itching to get this out in as many places as we can in the UK. However, we want to do this in the right way, each Flight Club has its own personality and we want to make sure we can do that sustainably over time.

    What new technologies are you releasing?

    Something we are releasing this month, which is absolutely massive and something we have been working on for 18 months, is Flight Club Stories. Everything at the playing area; any winning shots, group photos and loop cams are all sent to the customer the next morning on a highlights package of your night. So it lets visitors relive their night, a bit of gloating on leader boards and share images themselves. It has been a real labour of love and it’s a very exciting product.

    What do you look for in a property for your business?

    When we are looking for new property, we are generally looking for a location with a mixed demographic. We wouldn’t want to go anywhere that’s super office-y or super media; it will be something for everybody.  So that is why our two current venues, which is Shoreditch and New Oxford Street are both poised between two demographic pools. When we are looking at Manchester or other London sites, we are always looking to see if it is equidistant between different sectors.

    Do you think this is the same for all Competitive Socialising venues?
    I don’t think everybody does it, some are very destination lead due to needing a bigger floor space. Whereas we want to combine your local bar with an activity, so for us it’s about being poised where people can pop in for a drink as well. This means people pop in for a drink and they see the darts and want to have a go.

  12. From Golden Lane to Emerald Street – one firm’s path to relocation

    20 April 2018
    The Tenant Representation Team has just helped Pozzoni Architecture in its relocation to a more efficient office space to reflect its operations.
    The practice is leaving a classic warehouse space on Golden Lane in Clerkenwell with grit-blasted brick walls, concrete floors, black iron columns and chunky timber beams – very much reminiscent of a riverside wharf. Although extending to 1,300ft2, the columns were an – albeit handsome – interruption to the space and the atmosphere was more rugged and brooding than bright and airy.

    However, its location close to the vibrant Whitecross Street Market was something that Pozzoni very much enjoyed and the company was keen to remain part of an active local scene. That meant initially confining its search to Clerkenwell and Farringdon. 

    Things changed when our own explorations turned up an office about a mile down the road at 10-12 Emerald Street in Bloomsbury: a column-free first floor space in a mid-century former factory building with a fresher, cleaner, whiter aesthetic. With its bigger windows and higher ceilings we thought it might just fit the bill; not just from its interior properties, but also for the location. 

    Surrounded by a number of celebrated Londoners’ favourites, Pozzoni’s new office is just around the corner from the historic charms and independent shops of Lambs Conduit Street and within 10 minutes walk of Russell Square, Leather Lane Street Market, the revamped Brunswick Centre and the eastern end of Covent Garden.

    Alongside all the local prandial and retail distraction, Emerald Street is incredibly accessible. Holborn, Russell Square and Chancery Lane tube stations are all less than 10 minutes walk; two more tube stations at Farringdon and Tottenham Court Road (both soon to be stops on the upcoming Elizabeth Line) about 15 minutes walk; and three rail termini at Euston, Kings Cross and St Pancras International all within a mile.

    That’s a great result for Pozzoni, ticking all the boxes on its requirements list and optimising both its operation and environment. If you’d like us to help you do the same with your business, simply contact the Tenant Representation Team.

    The Author

    Dash Boyeva
    020 7344 6623
    07811 111888
    dash.boyeva@colliers.com
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