THE RACE FOR SPACE

10 CUSHMAN & WAKEFIELD 11 RACE FOR SPACE Large transactions from several ‘unicorn’ companies have buoyed pre-let volumes in recent years including Apple’s acquisition at Battersea Power Station (475,000 sq ft), Dentsu Aegis Network’s 312,000 sq ft deal at 1 Triton Square and Facebook’s recent commitment at King’s Cross (600,000 sq ft). Banking & financial occupiers were the next most active sector, accounting for 31% of total pre-let volumes over the last ten years. significant recent transactions include Deutsche Bank’s future consolidation into 21 Moorfields (469,000 sq ft), SMBC’s acquisition at 100 Liverpool Street (161,000 sq ft) and TP ICAP’s acquisition of 135 Bishopsgate (122,000 sq ft). Public sector and government occupiers have remained a vital component of the pre-let market in Central London, with volumes driven by large-scale consolidations from HMRC, FCA and TfL, as well as the Chinese Embassy’s owner-occupier transaction at Royal Mint Court. Interestingly, no professional services firms have committed to an off-plan pre- let over the last ten years. This sector has been involved in 27 pre-lets during construction in that time period, with an average transaction size of 67,150 sq ft, and an average lead-in time of just over 11 months. Despite their high profile, flexible workplace providers have accounted for a small proportion of pre-lets since 2009, representing just over 6% of pre- let volumes (see fig. 9). The majority of these transactions have taken place during construction, with an average lead-in time of 14 months. When analysing the largest pre-lets (300,000 sq ft and above), there are just three sectors represented over the last ten years; Banking and financial, media and tech, and public and government. London’s position as a global centre for creative industries is reflected in tenant demand for new, quality space; media & tech occupiers have accounted for 32% of total space pre-let in the last 10 years OCCUPIER SECTOR ANALYSIS 26 % 39 % 6 % 2 % 3 % 19 % 3 % Banking & Finance Professional Services Media & Tech Insurance Legal Flexible Workplace Public & Govt Retail & Leisure Manufacturing Other Figure 6 Central London off-plan pre-lets (2009-2018) Source: Cushman & Wakefield 26 % 13 % 27 % 5 % 6 % 3 % 10 % 1 % 7 % 2 % Banking & Finance Professional Services Media & Tech Insurance Legal Flexible Workplace Public & Govt Retail & Leisure Manufacturing Other Figure 7 Central London under construction pre-lets (2009-2018) Source: Cushman & Wakefield WHAT WILL THE FUTURE TRENDS BE? Oxford Economics forecasts a fall in banking sector jobs over the next five years with Brexit dampening demand from banking and financial occupiers. Both the professional and media & tech sectors are forecast to grow over next five years. Landlords cannot rely on flexible workplace providers to buoy pre- construction letting volumes in the same way they can with post- completion lettings, not least due to covenant.