INTRODUCTION
Overview
Active Occupiers
Understanding the New “Norms”
2022 Migration Patterns
in headlines
2022
in NUMBERS
2022
2022 in Headlines
590 deals in 2022
highest on record
transactions and a reduction in the
(10 in 2022, compared to 15 in 2021).
The number of new Central London occupiers taking space
increased marginally to 63 in 2022
following on from a strong 2021, driven by an increase in those relocating from outside Central London
and strong volumes of new market entrants.
West to East migration dominance returned after an evenly matched 2021
with 31 occupiers moving in this direction, compared with 19 the other way.
Of the established companies
Government and Public Sector occupiers, Media and Retail & Leisure businesses relocated further afield from their previous London office.
2022 in Numbers
590 transactions in excess of 5,000 sq ft in 2022, equating to
10.47 million sq ft
323 located in the City and East London
244 located in the
West End
interact with the graph to learn more
TRANSACTIONS
TRANSACTIONS
CITY & EAST LONDON
WEST END
driven by a significant
rise in the number of
58% year-on-year
(33 in total of which 19 were from within Greater London)
The average distance moved by occupiers who relocated within Central London in 2022
0.88 miles
occupiers expanded
377
on their prior accommodation
million sq ft
total net expansion
4.58
led by the Banking & Finance
and Professional Services sectors
GLOSSARY
• Established companies: comprises all occupiers that already have an office in Central London
• Mover: an office move in/out of a submarket within Central London
- Stayer: an office move within the same Central London submarket as the previous office
- Relocator: an office move into a new Central London submarket
• Expansion: an office expansion, either within the existing office location or a secondary/tertiary location in Central London
• New entrants: comprises all occupiers that have relocated their office from outside Central London or are a new occupier
• Education & medical: comprises all education & medical occupiers who have taken office space in Central London - not included in the relocations data
• Flexible workspace: comprises all flexible workspace providers who have taken a traditional lease or signed a management agreement in Central London - not included in the relocations data
23 occupiers remain confidential (excluded from analysis)
sub-25,000 sq ft
volume of 100,000+ sq ft deal
INTRODUCTION
Overview
Active Occupiers
Understanding the New “Norms”
2022 Migration Patterns
overview
new entrants
market movers
market makers
There were 21 transactions conducted by Flexible Workspace providers in 2022, which was the lowest number of deals since the boom in the sector – with the exception of 2020. Activity in the sector was a negligible element of take-up during the course of the year. There were eight deals in the Education & Medical sector, behind the 15 accounted for in 2021 and on par with that of 2020. Excluding these sectors and the 23 confidential occupiers, 538 transactions by established Central London and new/outside London businesses took place during the year, the joint largest number of deals in a single year (with 2015).
2022 Net Migration
2022 Relocation Type
The number of new entrants, which consists of both new businesses and those who have relocated from outside Central London into the market, surpassed 2021’s record year as 63 businesses entered the market. This equated to 734,885 sq ft of additional demand into the market. 33 of these businesses were moving into Central London from elsewhere in the UK, including 19 who relocated from within Greater London - equating to 214,674 sq ft of take-up.
New to the market
Moving in
The number of new entrants were evenly spread across the West End and City at 30 apiece, although the quantum of space acquired was higher in the City – 382,530 sq ft compared with 294,981 sq ft in the West End. Interestingly, 3 new entrants acquired a total of 57,374 sq ft in East London – the largest number of new entrants since 2016, although the volume of space was markedly lower. Kadans were the standout occupier, taking office space in close to proximity to their Life Science development within Canary Wharf, phase 1 of which is due to be delivered in 2026.
In the City, the City Core housed the greatest number of new entrants, with 10 occupiers acquiring 119,698 sq ft of space in 2022.
Fringe locations in the West End have been less influential, with businesses acquiring their first Central London office in locations such as North of Oxford Street (5) and Fitzrovia (3),both of which border the prime submarkets and have the added benefit of new Elizabeth Line connections at both Bond Street and Tottenham Court Road.
Locations such as White City, where 3 new occupiers acquired space in 2022, also remain attractive, from both a price point and quality of space available.
Relocations into Central London increased from 20 in 2021 to 33 in 2022 – even if the average distance dropped from 55 miles to 30.2 miles. All but one of these relocations were for units of space that were less than 25,000 sq ft, with the majority falling between 5,000-10,000 sq ft (23).
Whilst this continuation of a trends seen within the last decade, in some cases, these past smaller relocations into Central London have led to further expansion of space (both within an existing building or a secondary office).
In 2022, there were 339 occupiers who relocated to different premises within Central London, the largest number since 2015. This equates to 66% of total take-up for the year. 187 businesses moved into a new submarket (relocator), whilst the remaining 152 acquired new space within the submarket of their former location (stayer).
How Far?
Who?
The largest volume of movers went into the City Core (95) – 27 were relocators and 68 were stayers. This was close to double the movements that took place in 2021 (58 movers overall, 35 of which were stayers) but behind figures recorded in 2019 (107 and 74 respectively).
Clerkenwell, Fitzrovia and Southbank also saw significant amounts of activity. There were 28 movers into Clerkenwell – the largest recorded for this submarket – 8 of which had already been based in the submarket. Unsurprisingly, Media and Technology firms were particularly active, acquiring 134,939 sq ft across 12 transactions, equating to an average deal size for movers of 11,245 sq ft.
Relocations into and within Fitzrovia have increased in recent years, and 2022 was no different. The market saw 25 relocations. Of these, 7 were already previously based in Fitzrovia. The remainder, bar two, relocated from elsewhere in the West End.
2022 saw 17 movers across East London. Canary Wharf alone recorded 11 occupier relocations – 10 of which moved from within. This surpassed the total intra-Canary Wharf relocations of the prior six years combined. Of these, five occupiers reduced their footprint, with Citigroup being the largest. The bank relocated into 94,500 sq ft at 40 Bank Street while an extensive renovation of their 530,000 sq ft HQ at 33 Canada Square takes place, with estimated completion in late-2025. Another notable deal for the year was Datatonic’s move out of flexible workspace at 1 Canada Square on to their own floor within the same building.
The average relocation distance by market movers, both those who relocated within and outside of their former submarket, reduced to 0.88 miles in 2021. This was an 8% reduction on 2021 and down on both the pre-pandemic and current five-year averages of 0.99 miles and 0.92 miles respectively. Reductions were noted across various sectors year-on-year, the most prominent of which were Professional Services (-36%), Manufacturing & Energy (-20%) and Retail & Leisure businesses (-17%). Conversely, the Insurance sector saw an increase to 0.45 miles in 2022, from 0.23 miles in 2021.
However, these trends do change when segregating the results to just those businesses who relocated into a different Central London submarket. In 2022, this average distance decrease by 13% to 1.25 miles, with reductions noted in the Professional Services sector (-34%), Retail & Leisure businesses (-33%) and within Government & Public sector offices (-22%).
Where?
The Professional Services sector was the most active in 2022, with 102 moves recorded throughout the year. Whilst the West End saw more overall movers within this sector – 50 compared with 47 in the City and 5 in East London – stayers in the City were more commonplace (26 compared with 20 in the West End).
The Legal sector was particularly active during 2022, taking a 15% share of take-up during the course of the year. Kirkland & Ellis led the way, pre-letting 306,000 sq ft at 40 Leadenhall, with the option of a further 100,000 sq ft in place should they require it. Upon 40 Leadenhall’s completion, the firm will vacate the 162,000 sq ft they currently occupy in 30 St Mary Axe, equating to a net overall expansion of over 140,000 sq ft. Forsters LLP also committed to additional space, with their plans to vacate 25,000 sq ft upon completion of 22 Baker Street where they have pre-let 52,100 sq ft.
Submarket Movers
Relocation Distance, All Movers
Relocation Distance by Sector, All Movers
What?
Throughout the year, there were 52 submarket movers who signed subleases. The most active sublessors of space came from the Banking & Finance sector who were able to successfully sub-let 365,000 sq ft across 12 transactions. This was followed by 155,000 sq ft of successfully sub-let space from the Professional Services sector across 11 deals.
2022 saw relatively little sub-letting from the Technology sector, with four businesses subleasing just 51,200 sq ft. However, looking forward, 2023 could be a different story. There is currently c.800,000 sq ft available on a sublease from Technology businesses – equating to 12% of the 6.8 million sq ft of sublease space currently available in the market.
Elsewhere, the sector saw two large consolidations. Hogan Lovells intend to exit out of two offices into a new 226,000 sq ft HQ on Holborn Viaduct, resulting in a net reduction of their footprint across Central London. Clifford Chance’s office space will contract by around 33,000 sq ft when they move into their new office space at 2 Aldermanbury.
The latter part of 2022 saw a number of the largest Technology businesses re-evaluate their workforce needs – for different reasons. Nevertheless, the sector was still active during the course of the year. Media & Technology businesses accumulated a combined 98 relocations during the year, the highest number since 2015 - when 113 businesses moved. The City was the favoured market for this group, with 61 businesses moving here, 29 of which relocated within their existing submarket.
Market Movers
by Sector
The Consolidators
The Expanders
Expanders & Consolidators by Sector, Established Companies
During the course of 2022, 377 existing Central London occupiers added to their office footprint. This included both business who acquired an additional office space or those that relocated and acquired more space than their previous office. All in all, this accounted for take-up of 6.25 million sq ft, and a net expansion (the size difference between the new and formerlocation(s)) of 4.58 million sq ft for the year.
Pre-letting was the primary outlet for the acquisition of additional space, with 22 expansionary deals compared to nine consolidatory deals.
Key examples included pharmaceutical firm MSD pre-letting 195,100 sq ft in Bloomsbury, expanding on its existing office space in King’s Cross, which it will retain. Additionally, Blackstone’s pre-let of 226,000 sq ft in Mayfair will replace the occupiers existing c. 72,000 sq ft office, also in Mayfair.
GSK, who signed a short term lease of 31,600 sq ft at Triptych in Southbank in 2022, has a future, and larger, relocation planned at The Earnshaw in Bloomsbury, upon completion in 2024. However, given that they will be exiting out of their current Brentford HQ at the same time, their total net office space will contract by around 580,000 sq ft.
The Professional Services sector has historically accounted for between 10-15% of overall annual take-up in Central London. However, the sector saw the most activity during 2022, both in terms of the number of occupiers who expanded their total Central London office space (110) and the net space gained from expansion of 954,755 sq ft. Furthermore, 79 occupiers within the Banking & Finance sector expanded their existing floorspace while 14 contracted, resulting in a net gain of 1.29 million sq ft.
Small to medium sized businesses showed the most likelihood of expansion. The 330 businesses occupying less than 25,000 sq ft collectively recorded a net expansion of 2.75 million sq ft. Over the last five years take-up within this size band accounted for between 40 and 50% of take-up. The growth of this slice of the market highlights not only the growing parts of the economy, but the fact that many businesses continue to work to find the right space for their hybrid requirements – with more sometimes being better.
While the number of expanding occupiers was the highest on record, the volume of contracting businesses also set a record high of 96. This equated to a net loss of 2.09 million sq ft across the market, with the aforementioned acquisitions by GSK, Citigroup and Hogan Lovells among the largest overall consolidations. These examples meant that the sectors with the largest net consolidations were Manufacturing & Energy and Banking & Finance, with the former recording a 656,842 sq ft loss of space across six occupiers and the latter seeing 14 occupiers reduce floorspace by a total of 579,474 sq ft.
The largest volume of consolidators relocated into the City market (48), with the City Core seeing 28 deals and a net loss of 416,866 sq ft recorded. In Bloomsbury and Paddington, net consolidations of 592,097 sq ft and 115,451 sq ft were seen in 2022 across 4 and 2 deals respectively, with all other submarket losses below 100,000 sq ft.
Expanders & Consolidators by Deal Size, Established Companies
The larger, previously mentioned transactions did skew figures considerably. When removing all consolidations deals over 100,000 sq ft, of which there were 6, the net reduction of space fell from 2.09 million sq ft to 1.35 million sq ft. Going a step further and looking only at the smaller end of the market, 78 consolidations in the sub-25,000 sq ft market were recorded, equating to a total net reduction of 715,226 sq ft. This makes up 81% of the consolidatory market in 2022, in terms of the number of occupiers, and 34% of the whole market net loss recorded.
Of the established companies, 136 opted to expand on their current footprint by opening an additional office location within Central London, equating to 1.91 million sq ft of take-up. Whilst the number of deals that took place in this category was the highest on record, the quantum of space was behind the highs of over 2 million sq ft we saw in 2021 and the three years prior to the pandemic.
This was markedly lower than figures recorded in 2021 but ahead of pre-pandemic trends. Shoreditch and Clerkenwell continue to be attractive, with 8 and 4 new entrants respectively, although smaller volumes of space were generally sought after in these locations.
The difference in rental values between core and fringe locations can be a driving factor for new entrants, however, the added benefit of the Elizabeth Line opening at both Farringdon and Liverpool Street stations have increased the attractiveness of these fringe submarkets.
An example of this is Tableau, who relocated from Richmond into the Southbank, and have since expanded their office space within the same building.
Of the new market entrants in 2022,
8 acquired space on a sublease, with the sublessor for half of these deals being a professional services firm. This sector was the most active for sublessors across the market and all relocation types throughout the year.
The 2 exceptions were United Talent Agency and Sine Digital, who migrated from Clerkenwell and Shoreditch respectively.
The increase in good quality supply in Fitzrovia and Clerkenwell has driven demand. This is likely to have been further exacerbated by the long-awaited opening of Elizabeth Line in 2022 which, as well as being an upgrade to the commuting experience for Londoners, importantly enables further and faster access to London’s talent pool.
In another record year for a submarket, the Southbank saw 22 movers during the year, 10 of which were stayers, surpassing the previous high of 20 recorded in 2015, 2016 and 2018. Of all the movers, 5 occupiers migrated from the West End.
OVERVIEW
NEW ENTRANTS
New to the Market
MOVING IN
MARKET MAKERS
MARKET MOVERS
WHAT
WHO
HOW FAR
WHERE
GLOSSARY
• Established companies: comprises all occupiers that already have an office in Central London
• Mover: an office move in/out of a submarket within Central London
- Stayer: an office move within the same Central London submarket as the previous office
- Relocator: an office move into a new Central London submarket
• Expansion: an office expansion, either within the existing office location or a secondary/tertiary location in Central London
• New entrants: comprises all occupiers that have relocated their office from outside Central London or are a new occupier
• Education & medical: comprises all education & medical occupiers who have taken office space in Central London - not included in the relocations data
• Flexible workspace: comprises all flexible workspace providers who have taken a traditional lease or signed a management agreement in Central London - not included in the relocations data
THE EXPANDERS
THE CONSOLIDATORS
2022 New Entrants
INTRODUCTION
Overview
Active Occupiers
Understanding
the New “Norms”
2022 Migration Patterns
Migration &
Rental Growth
New Clusters
Migration AND REntal growth
Between 2020 and 2022, strong prime rental growth was recorded in locations such as Mayfair & St James’s (9.1%), Soho & Kensington (8.3%), Midtown (7.4%), Paddington (6.7%) and King’s Cross (6.5%). Comparing this to rental growth in the three years prior to the pandemic, growth was varied. Mayfair & St James’s recorded an overall decline of 8.3% during this period, driven by uncertainty surrounding Brexit negotiations and its impact on development starts and occupier relocations. In Paddington however, rental growth of 20% was recorded between 2017 and 2019, largely due to the delivery and subsequent leasing activity associated with the 4 Kingdom Street scheme.
With the exception of Paddington, the areas with strong rental growth were very different during the pre-pandemic period. Increases were noted in Clerkenwell (11.5%), Shoreditch and Southbank (7.7%), with supply constraints in these cost-effective locations, when compared to pricing within the core markets, driving demand.
Strong occupier activity within submarkets does not always correlate to strong rental growth, evidenced in by both charts which compare net migration and rental growth for 2017-2019 and 2020-2022. Availability of existing and future supply, not just in the whole but of the ‘right’ or ‘wrong’ type of product, as well as the underlying economic conditions fundamentally drives rental tones.
New Clusters
Whilst it is true that a number of occupiers still make decisions based on submarket boundaries, the majority are driven by the fundamental elements of location in terms of access to talent – through transport infrastructure; access to amenity - places to eat, drink and have a good time, as well as the benefits of particular buildings.
London has benefitted from an upgrade in its connectivity through the development of the Elizabeth Line, bringing more locations closer to larger swathes of the talent pool, in a shorter period of time – as well as frankly upgrading the travel experience through new stations and improved trains. However, more fundamentally over the last number of years, we have seen a shift in working and commuting trends, where workers have much more choice around how and where they work. This has thus far manifested itself in changes in overall public transport use, the number of days worked, and the distance people would prefer to travel within central London – put simply, the number of journeys and walking distances are down since the pandemic.
Taking these elements into account, it therefore follows that the make-up and shape of London’s existing clusters will evolve as some locations become more attractive to workers, and therefore occupiers, and some locations become less desirable – in the case of the latter, other driving factors such a desirable postcode do still play a part. This will drive development decisions – although of course, development has the intrinsic ability to ameliorate locations – but also investment activity. The changes in commuting and occupational clusters will see the investment market align, and create opportunity, potential value (and risk) where there is a mismatch.
Recent market conditions and lack of available product will affect alignment over short periods over time, certainly in less dense locations. From an investment transactions perspective, the number of deals between 2017-2019 and 2020-2022 has almost halved. However, looking at the alignment over the course of the last three years highlights a number of interesting areas.
As an example, the mapping below highlights that activity in and around the City focus is now more concentrated than prior to 2020.
The Southbank stands out as area where changes have been most noticeable, in terms of leasing and investment activity pre- and post-pandemic. Since 2020, there has been limited investment activity, but occupier activity has strengthened. During this period, nine schemes completed equating to 781,580 sq ft with 60% pre-let or under offer upon completion. A further five schemes totalling 700,000 sq ft of quality accommodation are currently under construction, and robust occupier demand will create a number of investment opportunities in the future.
Hammersmith has shown a similar evolution of activity, with stronger leasing activity noted in the last three years compared with the three years prior. This has aligned with strong development prior to the pandemic, when c. 415,000 sq ft was delivered to market. Since then, there have been no office completions, however there is over 250,000 sq ft currently under construction and due to deliver in the next three years – another potential area of interest for investors.
The pipeline of new developments on the horizon with completion within the next three years has reduced slightly. A total of 18.2 million sq ft of office space was delivered across Central London between 2017-2019 (106 developments), and between 2020 – 2022, a further 16.5 million sq ft (117 developments) completed. At present, 14.4 million sq ft (93 developments) is currently under construction with completion scheduled by 2025. These developments should provide the basis for strong occupational and investor activity in the future.
For landlords and developers, the desirability of their developments to their end-users will determine their success – this will be determined by a number of factors: location, quality of place, sustainability, and quality of the built environment. The evolution of our clusters, as outlined above, will reinforce the strength of certain locations, while in some cases diminishing the attractiveness of others. As we see an evolution of our markets, it is fundamentally understanding occupational decision-making that will underpin the continued success of our markets, and London as one of the best places in the world to do business.
GLOSSARY
• Established companies: comprises all occupiers that already have an office in Central London
• Mover: an office move in/out of a submarket within Central London
- Stayer: an office move within the same Central London submarket as the previous office
- Relocator: an office move into a new Central London submarket
• Expansion: an office expansion, either within the existing office location or a secondary/tertiary location in Central London
• New entrants: comprises all occupiers that have relocated their office from outside Central London or are a new occupier
• Education & medical: comprises all education & medical occupiers who have taken office space in Central London - not included in the relocations data
• Flexible workspace: comprises all flexible workspace providers who have taken a traditional lease or signed a management agreement in Central London - not included in the relocations data
Occupier & Investment Clusters
Net Migration & Rental Growth 2020-2022
Net Migration & Rental Growth 2017-2019
CONTACT US
Heena Gadhavi
Associate Director, UK Research
Daryl Perry
Head of UK Research
Ben Cullen
Head of UK Offices
Andy Tyler
Head of London Office Leasing
James Meikle
Head of London Occupier Representation
Martin Lay
Head of London Office Capital Markets
GLOSSARY
• Established companies: comprises all occupiers that already have an office in Central London
o Mover: an office move in/out of a submarket within Central London
- Stayer: an office move within the same Central London submarket as the previous office
- Relocator: an office move into a new Central London submarket
o Expansion: an office expansion, either within the existing office location or a secondary/tertiary location in Central London
• New entrants: comprises all occupiers that have relocated their office from outside Central London or are a new occupier
• Education & medical: comprises all education & medical occupiers who have taken office space in Central London - not included in the relocations data
• Flexible workspace: comprises all flexible workspace providers who have taken a traditional lease or signed a management agreement in Central London - not included in the relocations data
Overview
Active Occupiers
Understanding the New “Norms”
2022 Migration Patterns
INTRODUCTION
Alistair Brown
Head of Lease Transactions & Advisory UK
GLOSSARY
• Established companies: comprises all occupiers that already have an office in Central London
• Mover: an office move in/out of a submarket within Central London
- Stayer: an office move within the same Central London submarket as the previous office
- Relocator: an office move into a new Central London submarket
• Expansion: an office expansion, either within the existing office location or a secondary/tertiary location in Central London
• New entrants: comprises all occupiers that have relocated their office from outside Central London or are a new occupier
• Education & medical: comprises all education & medical occupiers who have taken office space in Central London - not included in the relocations data
• Flexible workspace: comprises all flexible workspace providers who have taken a traditional lease or signed a management agreement in Central London - not included in the relocations data
Get in touch to discuss this analysis in detail with our expert C&W team.
