With its neon lights, hip restaurants, bars and entertainment, Soho has long been a huge pull for global media and advertising giants looking for a central London location with an edge. Its former less salubrious label as London’s red-light district kept rents cheaper than Covent Garden and Mayfair – another draw for media occupiers.
But the slow gentrification of Soho, rising rents and emerging hip new London submarkets means that a ‘W’ in the postcode is no longer the driver
it once was.
More and more media companies are uprooting to SE1 and E1. One of the boldest moves was French giant Havas signing a lease for a new London HQ at Three Pancras Square, King’s Cross, N1, in September (see panel, below).
Cushman & Wakefield research shows 29% of media and technology businesses relocated to a new submarket in central London and its fringe in the first half of the year. So is Soho losing its edge?
Chris Lewis, director and head of the TMT division at Deloitte Real Estate, says Soho emerged as a creative district because of its “plethora of affordable, quirky and flexible office buildings which made it a place that attracted a wide range of media companies”.
But the word “affordable” no longer applies. Soho rents were £87.50 per sq ft for grade A stock last year, a figure that is forecast to rise by 10.2% by 2018. By comparison, Carter Jonas points to Clerkenwell, where top rents were £55 per sq ft in Q1 2014 and £52.50 per sq ft along the South Bank. The firm says rents could jump by up to 9% by the end of the year, but the locations would still be cheaper than the West End.
“Finding rents below £50 per sq ft anywhere in Soho or Noho for space is a tough call,” says Lewis, who admits this is a contributing factor for companies turning their backs on the area.
His view is shared by Tom Carroll, director, EMEA research at JLL, who says: “Property costs remain a key driver of occupier decision-making across the board. Rising rents in Soho have clearly put pressure on the advertising sector to explore new locations in London.”
Tenants recently understood to have committed to moving their head offices out of the core West End include Omnicom and Publicis.
But this is not the only reason for the migration. CBRE has found it is getting harder and harder for occupiers to secure space. Its research shows that West End office availability dropped to 3.7m sq ft in Q3 2014, down from 4.8m sq ft in the equivalent period last year. Meanwhile, the Soho vacancy rate dropped to a very low 1.8%. In the West End, only 1.6m sq ft of new space is under construction, against 3m sq ft of demand.
As a result, the market is expected to see further relocations. Dan Hanmer, senior director Midtown and South Bank office leasing at CBRE, says: “[Affected firms] will either pioneer new neighbourhoods in Shoreditch and, increasingly, Whitechapel and Bethnal Green, or head to SE1.”
Deloitte’s Lewis says a number of his advertising clients are also looking at King’s Cross and Angel.
So the days of all the ad giants being lumped together in the West End are gone, but that doesn’t mean the area has lost its allure for all of the industry. The importance of having ‘W’ in your postcode is illustrated by the fact that the voice of British advertisers, ISBA, recently relocated after 10 years – from one W postcode to another.
There will always be some companies that are willing to pay high for the best and most suitable offices in London, as CBRE’s Hanmer says: “Marketing budgets are back and the office is now perhaps the most fiercely fought battleground in the war for talent.” Watch this advertising space.
Southbank draw
Ogilvy & Mather
Clients include Coca-Cola, Guinness and LG Electronics
Ogilvy & Mather announced last year that its staff would relocate from Canary Wharf, E14, and Paddington, W2, to 226,300 sq ft at Archlane’s Sea Containers House, SE1, paying a rent believed to be around £45 per sq ft.
Chief executive Paul O’Donnell says: “Mayfair was not an option and Soho is too expensive, so we looked at King’s Cross, Shoreditch and South Bank. At first we dismissed Sea Containers House, SE1, because it had never really found its mojo, but we were so impressed with the latest plans to bring it back to better glory than ever. It’s going to be the best Ogilvy building in the world. We will be totally agile and flexible.”
Mark Kleinman, director at James Andrew International, which advised Ogilvy alongside C&W, says: “One of the principal reasons for moves like this is that the large buildings firms want are rarely available in the West End. A number of advertising businesses are getting out-priced.”
Consolidating into N1
Havas Worldwide
Clients include Durex and One Direction
The French advertising agency confirmed in September that it had signed a lease for 165,000 sq ft at Three Pancras Square, N1. Staff will relocate from five offices in the West End and fringe. A rent of up to £65 per sq ft was rumoured.
“We have 12 agencies in central London and wanted a building that would allow all to be under one roof, offering clients a totally integrated service but retaining their separate specialist identities,” says Chris Pinnington, global adviser at Havas Worldwide.
“It is a strategy we have applied globally, including New York, Boston, Paris and Sydney. We call these ‘Havas Villages’.
“We chose Three Pancras Square because it is perfect in many respects. It is an extraordinary development – the facilities and location will appeal to staff
and clients, offering superb access.”
It is also close enough to Havas’s post-production editing suites in Soho but, unlike years gone by, improved technology means it is no longer vital for the firm to be right next door to production facilities.
“It was difficult to find a large building at the right cost, but we have now found the right one,” says Pinnington. “Gone are the days when everyone had an office. The sector is now all about flexible and informal space that employees can use to work together with maximum efficiency.”
Andrew Barnes, director, office agency at JLL, which acted for Havas, says: “Access to a major transport hub and staff amenities were a key consideration.
“King’s Cross will provide fantastic staff facilities, plus it is one of London’s best-connected transport hubs, with direct access to Europe via Eurostar.”
Es in postcodes are good
Grey London
Clients include Gillette, Pringles and The Sun
Grey London occupies nearly 60,000 sq ft at the Johnson Building, EC1, after moving from the West End six years ago.
“It is not as important to be in Soho as it once was because companies are no longer dependent on being next-door to post production,” says chief executive Chris Hirst.
“It did feel strange to move at the time because having an E in your postcode almost made you feel like you were in the East End, but today there are just as many ad firms with a E in their postcode as there are with a W. I can think of four agencies that all go to the same pub on the City fringe.”
