Cushman & Wakefield has topped the 2017 London Office Market Analysis agents league table, disposing of 4,042,553 sq ft of space.
But the agent topped only one submarket overall last year – find out which one here.
The agent overtook 2016 overall winner CBRE, and was the only firm to top 4m sq ft of deals last year – taking a 28% market share in the process.
It recorded particularly strong second and fourth quarters, topping the league table each time with disposals of more than 1m sq ft.
| Top office agents | Submarkets |
| Investment | Investment league table |
| Take-up | Biggest leasing deals |
| Take-up by sector | Availability and rents |
C&W’s success was a combination of a sheer number of deals – 221 throughout 2017 – and its involvement in a number of major disposals, including the 283,450 sq ft let to WeWork at Southbank Place, SE1, in Q2.
Colliers International was the most active firm by number of deals due to its extensive involvement in the City fringe market.
It completed 240 deals, taking 9% of the market share in London.
The only new entrant into the top 10 was Pilcher Hershman, with 549,308 sq ft of disposals across 24 deals, including 80 Charlotte Street, W1.
SUBMARKETS
Q4 2017
Q4 was a challenge in the City core, with disposals below 1m sq ft for only the third time since 2008.
Cushman & Wakefield jumped two places to overtake Savills with 530,947 sq ft of disposals across 19 deals – a market share of 53%.
The firm acted on three of the biggest deals in the market last quarter, including the 116,176 sq ft 125 London Wall, EC2, lease to Lloyds Bank.
Savills, which came second with 330,614 sq ft, also acted on the 125 London Wall deal.
City fringe came back from its least active quarter in years with its strongest since Q3 2015, at 691,474 sq ft.
The submarket benefitted from WeWork taking 177,587 sq ft at The Stage, EC2, which was the third biggest deal of the quarter.
None of the agents working on that deal – Allsop, CBRE and GM Real Estate – managed to clinch the top spot, however, because of Colliers International.
Colliers was by far the most prolific player in City fringe with 42 deals, netting itself a 33% market share with 254,501 sq ft of disposals.
Docklands had a slight resurgence in Q4 following three quarters of almost complete inactivity.
Total take-up soared from just 12,498 sq ft in Q3 to 167,202 sq ft in Q4.
However, its 2017 total of 258,396 sq ft was an 80% fall on 2016, and about half of what Deutsche Bank secured in a single letting at 21 Moorfields, EC2, earlier in the year.
Knight Frank was involved in four of the 12 deals in Docklands in Q4, taking a 30% market share across 51,391 sq ft of disposals.
Activity in Midtown was up 36% on Q4 2016 and ended the year at a total 1,426,072 sq ft – 53% above the total recorded for 2016.
While Farebrothers was the most prolific player, with 18 deals across 125,198 sq ft, CBRE retained its place at the top, with 194,102 sq ft from 12 deals.
CBRE’s win came down to acting on Google’s 127,094 sq ft lease at King’s Cross, N1, which was the largest deal in the submarket and the fourth largest overall in Q4.
Cushman & Wakefield secured another victory in the Southern fringe with a commanding 58% market share and 165,713 sq ft of disposals.
It was unsurprisingly involved in the quarter’s biggest deal in the submarket – the Royal College of Obstetricians and Gynaecologists’ 55,924 sq ft lease at 10-18 Union Street, SE1.
The submarket had a strong year, totalling 1,011,298 sq ft – 45% above 2016 and 6% above the five-year annual average.
Much of that came from Q2’s 468,838 sq ft of disposals, achieved when WeWork signed the largest ever deal in the Southern fringe with a 283,450 sq ft lease at 2 Southbank Place, SE1.
That deal by itself was larger than all of Q4 combined, which came to 214,955 sq ft.
The West End was the most active submarket in Q4 2017 with 1,078,667 sq ft of lettings – only the second time since 2007 that it has topped 1m sq ft.
Nearly a third of that activity was Dentsu Aegis Network’s 310,000 sq ft letting at Triton Square, NW1 – the biggest deal in Q4.
There was a tight race at the top with Knight Frank and Cushman & Wakefield within 5,000 sq ft of each other, both disposing of space at Nova, SW1.
Knight Frank, however, came out on top with an extra push from its involvement in lettings at the Time & Life Building, W1.
Both Cushman & Wakefield and Knight Frank moved up the table and overtook CBRE, which had topped the list in Q3.
INVESTMENT
A total of £3.3bn was transacted in Q4 – down 16% on the previous quarter but back in line with spending levels in the first half of the year, writes Claire Poole.
The figure took total investment for the year to £14bn, an increase of over £1.5bn on 2016.
Though not back at 2013-2015 levels, it shows that the market has remained resilient to Brexit uncertainty.
Foreign investors continued to dominate the London office market in the final quarter of 2017, with the majority of the largest deals involving overseas purchasers.
Eight of the top ten largest deals were to foreign buyers with in excess of £1.83bn attributed to Asian investors – six from Hong Kong, one from China, and one from South Korea.
The last quarter of the year has traditionally seen the highest spend of a year, as investors look to get deals over the line.
However, in 2017 deals were fairly evenly distributed across the year. Q2 and Q3 were significantly supported by the sales of trophy assets, such as the Walkie Talkie at 20 Fenchurch Street, EC3, and the Leadenhall Building at 122 Leadenhall Street, EC3, which amounted to a third of each quarter’s spend.
While there was no similar standout deal in the final quarter, the volume of smaller deals kept the total up in line with previous quarters.
Felix Rabeneck, director in the central London investment team at Savills, said: “There were quite a few deals that exchanged unconditionally at the very back end of last year that are scheduled to complete in January or February this year.
“You will see those feed through and produce quite a big quarter in quarter one, which is interesting because it is traditionally the quieter quarter.”
The largest deal of Q4 was the sale of 15 Canada Square, E14, for £400m to Hong Kong’s Kingboard Investments.
The next largest sales were both in the City core.
200 Aldersgate, EC1, sold for £320m to Samsung Asset Management of South Korea, while 70 Gracechurch Street, EC3, was sold for £271.4m to Hong Kong-based Tenacity Group.
For the third quarter in a row, the highest spend was found in the City core, which had six of the top 10 largest deals.
It was a year of two halves in the Docklands, with zero transactions in the first half followed by three large deals in the second.
Savills completed the double, retaining its title from last year.
It topped the overall 2017 table, having acted on a total of £5.7bn of deals.
The agent was involved in seven of the 10 largest deals of the year.
CBRE moved up to second place, with a total of £5.12bn.
Eastdil Secured entered the top 10, thanks to its role in the two biggest deals of the year.
TAKE-UP
Leasing activity recovers
Q4 take-up came to 3,852,304 sq ft – a 10% rise, year-on-year – and 2017 as a whole came to 12.6m, which was 4% above the five-year average and 17% above 2016.
Activity was strong across the board, with the exception of Docklands, which recorded five-figure take-up in the first three quarters and finished the year with 167,202 sq ft in Q4 (see submarket table, above).
Simon Brown, associate director of UK research at CBRE, said the problem is that Docklands is reliant on very large deals, which did not happen last year.
The absence of large deals meant Q3 2017 was Docklands’ worst quarter since 2011, with disposals totalling just 12,498 sq ft.
But Brown added that CBRE’s expectation is more positive in the coming years.
“The relative value provided in Docklands compared with the other central London markets, along with the diversification of the tenant base and the pending opening of Crossrail, is likely to provide the market with increased resilience,” he said.
With take-up under 1m sq ft in Q4, the City had a weaker end to the year than expected. Andrew Parker, international partner on Cushman & Wakefield’s London markets team, said: “In the City core we have seen a softening of rents, making it good value in relative terms.
“We therefore expect it to perform well as a market in 2018 as this comparative value and new dynamism, alongside the connectivity which has always been its strength, appeal to an increasingly diverse mix of occupiers.”
The fourth quarter was a sign of a trend the market has talked about all year: a wider range of occupiers, led by tech, looking for space across the whole capital.
The five biggest deals in the quarter were from the TMT, Central and Local Government, Property, and Financial sectors.
Each of these occupiers went to a different part of the city, as the table below shows.
Take-up by sector
Overall, TMT was the most active sector in both Q4 and in 2017 as a whole, accounting for more than 27% of all lettings.
But flexible workspace was responsible for the biggest headlines this year, as a result of WeWork’s constant expansion.
Serviced offices have driven up the amount of smaller units flooding the market.
At the end of 2014, 545 units of less than 5,000 sq ft were on the market, representing 48.4% of total availability.
By contrast, at the end of 2017, 1,220 units of the same size were on the market, representing 62.2% of total availability.
It means that the average size of all available units has dropped considerably, from 28,500 sq ft in 2014 to 14,650 sq ft in 2017.
Although there are other factors to consider – such as companies slimming down their office footprint because of costs, and increased flexible working practices – the numbers suggest that there is an abundance of small space that would be taken if SMEs did not turn to serviced offices.
Availability/Supply
Availability in London was down for the first time since Q4 2015, falling marginally from 7.4% to 7.38% in the last quarter of 2017.
The rate rose in the City core from 7.7% to 7.8%, alongside lower than expected take-up, and in the City fringe from 6.6% to 7.6%.
As in the previous quarter, this came from a continued increase in second-hand space in the market, which rose 44% year-on-year to 12.4m sq ft.
Although take-up is up across London, that occupier interest is focused on new-build space – which has fallen 6% on 2016.
Between 2011 and 2016, second-hand space made up 58% of all take-up, but in 2017 that fell to 48%, contributing to the surge in availability.
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