Making the grade: is Cat A+ here to stay? Will CAT A+ plug the gap?31 May 2019The rise of serviced offices in London has created a subject for landlords to debate recently. In recent times some landlords have implemented pre designed offices with full fit outs including the necessary cabling works enabling a fully operational ‘turnkey office’ for a tenant to move into from day 1. This has become known as a ‘Cat A+’ delivery.Finishing a space to Cat A+ has been found to have its benefits, helping tenants to visualise the end product rather than an empty floor possibly in a shell condition.Certainly when comparing a vibrant serviced office full of life to a blank canvas conventional office floor it can be more difficult to imagine the finished product. The Cat A+ strategy has been implemented to stem the tide of tenants eschewing the hefty upfront fit-out costs and deposits of conventional leases in favour of the new wave of hi-tech serviced offices now flooding the market. Serviced offices certainly solve a short-term problem with no initial Capital Expenditure required, but it’s a silver lining with a heavy cloud: all those events, wellness rooms and on-site cafes make a beguiling offer, but they come at a price – sometimes three times the rent of a conventional lease and reviewed on an annual basis. So once a firm grows up, has money in the bank and needs more space, their eyes begin to turn to their ongoing monthly outgoings.This proved the case at 25 Watling Street where all but one of the floors were let in a Cat A condition, but where the final unit was proving rather stubborn. With a contractor already on site the landlord elected to build a Cat A+ fit-out and, low and behold, a tenant was found less than 4 weeks from completion of the works.Cat A+ bridges the gap between the time and cost of employing contractors, and the higher monthly outgoings of a hip co-working space, but the current model has predominately only been tested on the sub 5,000 sq ft market. In most cases a universal layout including meeting rooms, breakout area, kitchen with a breakout area can be used as a template. But as organisations expand, they develop very singular needs for their working environments which are impossible to second guess and may require additional capital to design and build which creates risk to a landlord indicatively delivering these works with no certainty it will secure a tenant.The problem of speculative Cat A+ fit-outs is the shifting of immediate financial outlay to landlords with no certainty of timeframe or success in securing a tenant. It leaves many feeling understandably uneasy and it’s not a burden we expect landlords to embrace any more than is strictly necessary, and most definitely not indefinitely.So is there another way? We think there might be.Should Cat A+ build a proven track record, which may take several years to reassure landlords, will we see landlords attempt to speculatively deliver fit outs alongside a comprehensive refurbishment or even newly developed/ redeveloped scheme? As was the case with 25 Watling St aligning works whilst contractors are onsite certainly saves cost. Should Cat A+ case studies continue to support the claim that they can minimalism void periods for a deal package equal if not greater than the blank canvas model we expect this will be a strategy some landlords simply cannot ignore..
Welcoming Wellness: the City Corporation’s vision for London in 203630 May 2019Last month City of London Corporation held presentation to set out its City Plan for 2036.
Hosted by a panel from the Corporation the event was attended by representatives from the city's commercial property market.They presented a future strategy for the City of London with the main focus being the creation of a safe and secure city that promotes health and inclusivity. Along with improving air quality and expanding the amount of public realm through pedestrianised areas and green spaces, there is a focus on turning the City into a 7-day shopping and cultural destination through extra retail space, hotels and the introduction of a managed night time economy.The corporation held a long public consultation exercise but were disappointed with the level of response from commercial occupiers in contrast to the high level of engagement from the city’s local residents. This may or may not shift the influence in the future of the city in favour of the relatively small number of people living there, but it certainly leaves the Corporation having to somewhat second guess the desires of existing commercial occupiers. That seems a shame given that businesses will undoubtedly be significantly affected such large-scale changes.More concerning was the lack of any concrete plan or ability to initiate any of the City Vision. With business rates going straight to the Government, the Corporation conceded that little existed in the way of funding to either begin any projects or to induce anyone else to do so. Rather, they are looking for the right schemes to be put forward by developers.From Colliers’ perspective it’s encouraging to see so much priority given to making the daily lives of occupiers easier, but the City Plan cannot really be seen as more than a potential blueprint for what may or may not materialise.Public realm is a particularly complex area. While the public consultation showed strong support for urban greening and open space, it came with concerns about its feasibility and viability. With developers necessarily looking at their bottom line, incorporating less rentable space into their schemes while maximising their return is a tough call. The wellness pitch that garners premium rents is usually associated with private roof terraces, lounge areas, cafes and fitness facilities, but it’s questionable whether occupiers would pay more to simply have a publicly-accessible space next to their building.Perhaps the City of London is relying on the sheer will and desire of developers to invest and construct in the Square Mile to drive the creativity and innovation required to deliver buildings that will, quite literally, need to appeal to everyone.
From courtroom to showroom30 May 2019Following on from letting the upper floors of Old Sessions House to Ennismore, the parent company of Hoxton Hotel, we have now let c. 5,000ft2 on the ground floor to the luxury Italian bathroom brand Gessi.Originally built as a courthouse in 1779, Old Sessions House has a long, storied and indeed motley history including a literary mention as the place where Oliver Twist was tried for the pickpocketing work of his friend The Artful Dodger. Given a Grade II Listing in 1985, the building is now being sensitively restored and refurbished by Sätila Studios to deliver a remarkable new location for modern businesses.Occupying the former prison cells, the ground floor space is truly one-of-a-kind and is a radical departure from the normal showroom environment: the flagstone floors, rustic brickwork and vaulted ceilings are a unique setting for Gessi to showcase its product range. The unit also includes external terrace areas totalling c. 1,900ft2 which will accompany their internal bespoke café.Gessi began life as a small workshop in 1992 and has since grown into a highly aspirational and respected name in the high end bathroom industry. Today, the company operates from an international headquarters and production centre about 100km from Milan in a purpose-built 800,000m2 industrial park.
London office occupiers facing space squeeze28 May 2019A 20-year record low for speculative space is leaving London with a seriously-eroded development pipeline of just 1m sq ft – enough to satisfy less than three months of demand at current levels.Supply of new development space is almost at a standstill and, while 2020 will see new product delivered, the intervening shortage will continue to provide occupier motivation for securing pre-lets. Speculative development levels are at their lowest in almost two decades and overall availability remains 15% below the 10-year average.
We’re now anticipating a supply/demand imbalance in the second half of this year with downward pressure on incentive packages preparing the ground for future rental rises.
This scarcity of good quality space is impacting take-up which dipped to an 18-month low in the first quarter of this year. However, the prevailing strength of demand is reflected in the fact that – even in the face of these conditions – the Q1 transaction levels were only 10% below the 10-year average.
There is currently over 4m sq ft of space under offer across London as a whole and in Q1 more than 36 individual deals were negotiated for units in excess of 20,000 sq ft.
Not surprisingly, prelets are increasingly prevalent in the London office market: more than 1m sq ft of space is under offer on a pre-let basis, while an additional 300,000 sq ft of new and refurbished space is also in solicitors’ hands.
A full house at Wharf Studios1 May 2019With the sale of the final remaining unit, Wharf Studios in N1 is now fully occupied and home to a wide range of businesses and organisations from the fashion, construction, charity and creative sectors.Wharf Studios overlooks the Wenlock Basin and consists of 45,000ft2 of industrial office space across the Ground, Lower Ground and Basement levels of the City Wharf development. With a wide range of floor areas from 3,731 to 9,276ft2, each of the six fully self-contained units has its own ground floor street access and most have private terraces.This part of N1 has become something of a cultural destination between City Road and The Regents Canal, with numerous art galleries - most notably the Victoria Miro - occupying the spaces among the many design studios.The Wharf Studios refurbishment was carried out by our clients Vengrove who bought the space through Colliers in 2016. Following completion of their purchase we worked closely with Vengrove and their architects, Thirdway, on both the Cat A specification and on dividing 45,000ft2 into 6 units of varying sizes to accommodate a broad owner-occupier audience. We also gave input on branding and marketing materials.The end product was a series of striking duplex and triplex spaces with huge windows facing the water, a BREEAM rating of EXCELLENT and an EPC rating of B. Finishes include exposed overhead services in powder coated white, steel floor tiles, raw concrete pillars, oak veneer detailing and ensuring black metal staircases.A full sales campaign began in the autumn of 2017 and over the last 18 months we have completed on sales to the British Ecological Society, Family Action, Ardmoor Construction, Mark Antony Fashion, Malim civil engineers and the creative agency Dixon Baxi.The combined sales value of the units totalled £23,237,500.
Advantage wellness: Colliers on court30 April 2019A beautiful Wednesday afternoon in London provided perfect conditions for our most recent Wellness in the Workplace event. This time the disposal, acquisition and members of the investment teams ventured outside to the tennis courts of Lincolns Inn Fields, a hidden gem in the heart of Midtown, until now.The City teams undertake a Wellness event once a month, not only for our physical fitness but also for our mental wellbeing, something which is at the forefront of our minds with the upcoming Mental Health Awareness Week.This month’s activity was an afternoon of mixed doubles, with the teams revealing a broad range of talent from across the ability spectrum. Several of the team are regular players and showed off their prowess in fine form. But special mention must also go to the novices who provided an amusing counterbalance to the display of expertise.The real surprise was James Walker who had somehow managed to keep his masterful tennis playing abilities a secret from the team. And while the afternoon was far competitive, he nonetheless wiped the floor with anyone pitted against him: a true dark horse.Although not as well known as the John Soames Museum that occupies one of the houses on Lincolns Inn Field, the tennis courts are well worth a visit and there’s also a spectators’ café for food and refreshments – it really is an oasis in the middle of London.Among the many benefits of tennis are increased aerobic fitness and reaction times; strength and flexibility; lowered resting heart rate and blood pressure, the list goes on… But there’s a social aspect to tennis that really gives it the edge, and is what we particularly enjoyed when out on the court.Of course, the best way to recover from so much running about is to replenish those burned-off calories with a healthy meal and rehydration. But alas, the best lifestyle choices aren’t always the most observed, and it was game, set and match to pizza and the pub.
Cunard House acquired for The Crown Estate29 April 2019Colliers have advised The Crown Estate on the acquisition of Cunard House, 15 Lower Regent Street. The Crown Estate have bought in the long leasehold interest from M&G securing outright ownership of the building.Colliers has a longstanding relationship with The Crown Estate, most recently advising on retail and restaurant leasing as well as the 2017 freehold disposal of Golden Cross House.The Crown Estate is the majority landowner of Regent Street, with a number of the buildings subject to long leaseholds, including, until recently, Cunard House which sits almost directly opposite The Crown Estate's own offices.The retail element of Cunard House is let to Costa Coffee and Mountain Warehouse and the upper floors are multi-let to a diverse range of office occupiers including well known property investors Segro plc, the largest industrial property developer in Europe, along with one of the biggest names in UK residential estate agency, John Hunt, the former owner of Foxtons.
Cool creative workspaces in classic city architecture15 April 2019Lloyds Avenue is one of the most striking streets in the City, lined with classically detailed Italianate buildings that were built in around 1900 by the Lloyds Shipping Company to house their operations.Number 6 has been recently refurbished to provide a series of contemporary work-spaces that range in size from 431ft2 to 1,835ft2 and can be taken either individually or grouped to suit a variety of business setups.The interiors are finished with bright white walls and oak engineered floors, with the original iron columns and woodwork painted in a cool modern grey. The effect is a soft, elegant and versatile backdrop reminiscent of many a city fringe work-space.The specification includes Daikin air-conditioning and black-enamelled suspended lighting by Fagerhult with acrylic diffusers and side emitting LEDs for evenly luminated surfaces. The landlord is also offering a fitted option to include meeting rooms, cabling and also high gloss kitchenettes with metro tiles and corian worktops.The high quality fit-out also extends to the communal areas where corridors are laid with designer Bolon flooring.Lloyds Avenue's singular architectural heritage has been designated a conservation area and is a dynamic city location. The double curve in the street and carved horizontal channelling in the masonry building facades drives the eye along the street, with the view at the northern end terminating in stunning fashion The Gherkin at 30 St Mary Axe puncturing the sky.Running between Fenchurch Street and Crutched Friars, Lloyds Avenue is within walking distance of a number of stations and transport connections with National Rail at Fenchurch Street, Underground at Aldgate and DLR at Tower Gateway.
When less is not always more11 April 2019Average office lease lengths in London are nearly a quarter of the length that they were back in the mid-1990s. During the intervening years, occupiers have demonstrated a preference for shorter leases and this has seen the average term fall from over 20 years to the 5.6 year mark that we have today.Various factors have contributed to this not least the balance sheet treatment of lease liabilities and a desire to mitigate these by taking shorter leases. It’s also pretty rare to find a business that is planning ahead more than five years so making a commitment to your workplace for around about the same period is an alignment of strategy and resource.And, of course, most recently we have seen the impact on the market from the co-working and serviced office operators with their ‘plug-and-play’ offer which means you can walk in and take an office for a month, a week, a day or even an hour.However, behind the statistical averages in our latest London office lease analysis there are different stories to tell. For example, the length of leases taken by public sector occupiers has only fallen by 10% in the last decade compared to the London-wide average of 46%. But the average for media and tech businesses – which have driven so much office demand across the capital– is now just four years.Not surprisingly, the drop in average lease lengths is most pronounced in the sub-10,000 sq ft market which has been most impacted by the rise of co-working. These have reduced by 50% in the past 10 years, but for office requirements of over 50,000 sq ft, the leases agreed are only 25% shorter than they were a decade ago.Interestingly, there is now some anecdotal evidence that occupiers who have been drawn to the super flexible, co-working environments are now returning to the ‘traditional’ market and the benefits that a conventional lease can bring. Some have found that the anonymity and lack of privacy in co-working facilities and also the penchant for providers to move their customers around their buildings to accommodate incomers is not to their liking.Will average office lease lengths in London fall further? It feels like - although there will be variations across different sectors and types of occupier - the market is now reaching a point of relative equilibrium which reconciles the needs of both occupier and office provider.Businesses clearly need flexibility and want to reduce long-term commitments but also realise that achieving this can come at an operational and financial cost. For many office occupiers, when it comes to lease lengths, less is not always more.
Craftwork on display8 April 2019The area around Whitecross Street is a unique corner of the city fringe. As the point where Barbican, Moorgate, Old Street and Clerkenwell meet, the mixture of city finance, independent retail, residential homes and iconic architecture adds a singular vibe to EC1’s tech and creative scene, not to mention Whitecross Street’s cracking daily street food market.Parallel to Old Street, narrow Dufferin Street runs east to west from Bunhill Road to Whitecross Street and is lined almost entirely with tall tenement buildings facing former warehouses.An example of the latter, Craftwork Studios is a formidable hunk of Victorian industrial heritage converted into media-style workspaces. Two office units ¬– one on the third floor and one on the fourth – are currently undergoing a complete refurbishment. Measuring 5,759ft2 and 4,421ft2 respectively, each has a terrific natural brightness from windows on three elevations.The interiors use a simple-but-highly-effective monochrome colour palette which serves to highlight the building’s original fabric, creating definitive examples of high quality City Fringe workspace. Alongside the grit-blasted brickwork, warehouse windows, steel beams and iron columns are contemporary additions of rich timber engineered floors, exposed air conditioning units and suspended LED light boxes hanging from 3 metre-high ceilings.Along with the refurbishment of the office spaces, the building’s main reception area and common part have been redesigned while other facilities include 3 passenger lifts, on-site commissionaire and secure cycle parking.Whitecross Street’s daily street food market has become one a huge local highlight and is a firm favourite with anyone living or working nearby. The unique atmosphere coupled with eats and treats from around the world is a genuine delight, matched only by the bonus of having it right outside the door.Being at the meeting point of so many adjacent districts also means excellent connectivity. Moorgate, Old Street, Barbican and Farringdon stations are all within walking distance and between them provide Underground, Thameslink and National Rail services. When the Crossrail project completes, Craftwork Studios will have two Elizabeth Line stations to choose from: either Farringdon or the Moorgate entrance to Liverpool Street.Both office units are scheduled for completion in summer 2019.
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