Top 5 considerations behind significant 2019 transactions

1. Landlord credibility
2. Limited choice & supply
3. Quality of building
4. Submarket location
5. Size/efficiency of floor-plate

Over recent years we have seen central London occupiers become more footloose, and the nature of tenant searches become increasingly product-led rather than locationally driven.

As a result of this change in focus, we have seen strong demand for high quality, well-designed buildings, even attracting tenants to areas they traditionally wouldn't be associated with. For example, the Brunel Building in Paddington has achieved much success and unprecedented rents for that submarket from occupiers more commonly associated with West End core markets.

Around 40% of the current 11.7m sq ft of active and potential tenant requirements we are currently tracking are central London wide. This is in contrast with five years earlier, where central London wide requirements only made up 17%, with the majority of searches being specifically focused on either the West End or the City.

Occupiers currently located in the West End account for almost three-quarters of potential and active central London requirements, with limited supply forcing occupiers located here to broaden their search criteria to include the City. This is in contrast with City-specific requirements, which are essentially all from occupiers already located there.

The increased awareness of the lack of supply across central London is also having an impact on the type of considerations that are being made by occupiers on whether to remain at their existing location or relocate. Over the past two years, we have seen supply constraints become a strong rationale for many occupiers choosing to renew or extend at their existing space.

It has also had an impact on the increased importance occupiers attach to landlord credibility as a result of the increased prevalence of pre-lets and the importance of schemes being delivered on time.

Whilst searches have become more building specific, submarket location still remains an important factor, particularly for occupiers in the Insurance & Financial sector in the City, who have a strong preference for being close to sector clusters, primarily seen in EC3. White City is another example of this and its ability to attract life science occupiers like Novartis, Autolus and Synthace, and ultimately creating a sector cluster that is continuing to attract further demand from other life science occupiers.

Locations with a good public realm offering, strong transport links or future infrastructure improvements, coupled with newly developed stock will attract strong demand, such as Farringdon, Clerkenwell & Victoria.

Occupiers are showing an increase in demand for larger and more efficient floorplates, which are currently sparse in the West End, and therefore are considering City locations due to the increased availability. Moreover, the opportunity to capitalise on lower occupational costs will also drive more price-sensitive/footloose occupiers to migrate eastwards.

_{Read the other articles within Spotlight: Central London Office Outlook  below}