FINANCIAL FOOTPRINT

The Financial sector has cemented its position as the most active for leasing in 2019, with a 24% share. This level of activity is up from the 18% recorded in 2018 and just pips the long-term annual average of 23%. In previous editions of The Occupier, we have highlighted how the sector has countered the expectations of downsizing or even departure of firms as a result of Brexit. The latest data confirms this and in fact shows that the sector has further entrenched its position.

The future of the financial industry in the UK is still subject to negotiation and will be a key talking point in phase II of Brexit. However, we should not forget that financial businesses wishing to operate in a post-Brexit Britain may need a base here in the UK, akin to those who want to operate in the EU. In doing so, they will be joining a diverse range of firms who have leased space in London during 2019, from the traditional to the new kids on the block, domestic and overseas, through to the boutique and corporates. The likes of which include Monzo Bank, Nationwide Building Society, NIBC Bank NV and NASDAQ to name a few.

FLEXING THE REAL ESTATE MUSCLE

Over the past few years, serviced office providers have been snapping at the heels of traditional business sectors, scooping up space at a fast pace. The quest for ultimate coverage has seen them account for 17% of take-up in 2019. Placing them ahead of the technology sector in terms of market share.

Despite the boardroom turmoil that beset the flexible leasing giant WeWork in the summer, the operator still leased an additional 29 sites adding approximately 750,000 sq ft to their portfolio – albeit the majority of these were in the first half of 2019. Another operator who has notched up double figures is Knotel, taking 14 sites. Not quite at the same volume as WeWork, but their leasing spree have significantly increased their coverage across London. Our data shows that the marketplace for flexible leasing got that little bit more crowded in 2019, as 32 unique operators leased space in 2019. More choice for tenants, more competition for the providers.

TECH FIRMS

The technology sector is a key part of the London economy. Funding into the sector in 2019 increased by 87% to $9.7 billion according to research by the Mayor of London’s promotional agency London & Partners. This increased investment into high growth businesses is helping to support firms from start-ups to established brands. However, office leasing activity by technology firms in 2019 accounted for 13%, down from the 15% in 2018. In real terms the volume of space leased has stagnated.

Whilst this is not indicative of technology firms snubbing London as an office location, it does beg the question, where are all the tech workers going. Though technology firms have not increased their share of leasehold space in 2019, they may well be opting for more flexible options. The technology sector has for a long time been a proponent of agile working practices, this is potentially now translating into reduced footprints.

However, having said that the tech giants have been active once again. Both Apple and Facebook have both taken 100,000+ sq ft spaces in 2019 and with Amazon reportedly on the hunt for more space in London we don’t expect the larger firms to shy away from leasing in the future.

RECRUITERS SIGN UP FOR MORE SPACE

A deeper dive into our data has highlighted an increase in the volume of office space recruitment agencies have leased in 2019. Just over 260,000 sq ft was acquired by 45 recruitment businesses, representing a 238% increase on the same period in 2018 (down from 49 firms). Recruiters are in expansion mode.

An active jobs market and employment at its highest level since the 1970’s makes for a competitive landscape for recruiters. Our research shows that businesses in this sector have taken an average 5,772 sq ft – double the size of that was taken in 2018.