Economic climate has "surprise" impact on Central London's occupiers' green views.
Date: 3rd September 2008 |
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London, UK – Rental cost has proved the key factor followed by retention of key staff in the decision to acquire new office space in Central London, with energy efficiency and green issues cited as the least important influencing factor, according to Knight Frank’s Central London Occupier survey which questioned more than 100 directors responsible for real estate at some of the largest companies located within London’s City, Docklands, and West End markets.
The respondents cover some of the largest office occupiers within Central London collectively employing circa 40,000 staff and occupying in excess of 10 million sq ft. All have had a presence in the Capital for longer than 20 years, reinforcing its significance as one of the world’s principal office locations and the high degree of loyalty amongst its largest occupiers.
In light of the current turbulent market, 40% of respondents cited rental cost as the most important factor in deciding to acquire new space, whilst the retention of key staff came second with 20% stating that it was an essential factor. Despite much emphasis being placed upon green issues in recent years, energy efficiency was ranked tenth with respondents citing it as the least important influencing factor, followed by a higher building profile which was ranked ninth.
Key factors which affect your decision to acquire new space:
| Rank |
Factor |
Rank |
Factor |
| 1 |
Rental Cost |
6 |
Occupational flexibility |
| 2 |
Retention of key staff |
7 |
Proximity to public transport |
| 3 |
Lease Flexibility |
8 |
Proximity to clients\competitors |
| 4 |
Space efficiency |
9 |
Higher building profile |
| 5 |
Higher quality environment |
10 |
Energy efficiency |
Bradley Baker, head of central London tenant representation, Knight Frank said: “Whilst the green agenda and sustainability issues are fundamental to the future of office buildings, our research has surprisingly shown that as economic markets suffer, such requirements become less of a priority to central London office occupiers looking to acquire new space: cost and retention of staff become key. We forecast that once the markets return, occupiers will again focus on the importance of sustainability.”
Despite the current turbulent market, 38% of all respondents commented that they expected their organisations to remain stable, although 20% stated they were likely to downsize with an additional 7% anticipated to consider outsourcing and a further 7% likely to relocate back office functions. This cautionary tone in the market reinforces the awareness of occupiers of the effects of the recent economic downturn and the fact that property commitments are likely to come under increasing scrutiny in the coming months.
Baker added: “The fact that 38% of all tenants thought their organisations were ‘stable’ is positive, however this is countered by 20% saying they would be downsizing. The dilemma facing tenants wanting to downsize is that they need to offer a reasonable length of lease in order to be attractive to the market ie a minimum of five years and that’s a long time to expect tenants to lock away space, particularly when they may need it back as soon as the position recovers.”
65% of respondents stated that if there was difficulty in finding space in the traditional core areas of central London, that they would consider locating in a development outside the Capital’s core. The More London development proved the most popular, alternative location of all respondents from across both the City and West End markets with a 20% response with Kings Cross ranking a close second with 15%, and unsurprisingly, also Canary Wharf proved an attractive alternative location with a 14% response.
“In the current economic climate, tenants have understandably identified cost as their most important factor. This has lead to tenants considering alternative locations outside traditional core areas. Kings Cross and More London in Southwark were nominated as their most favourable alternatives, both of which benefit from extremely good communication infrastructure, with the Jubilee Line having breathed life into the heart of Southwark, and Canary Wharf continues to attract major tenants.” said Baker.
65% of respondents believed the quantity of hotels and conference facilities surrounding their offices remained insufficient and 25% cited that more retail space was required. All responses stated that there were sufficient quantities of bars and leisure surrounding their offices and only 5% cited there were insufficient local health and gym facilities.
“Our research will prove of interest to the hotel, conference and retail sectors especially as there was a feeling that there was insufficient retail which was aimed more at the City and The Square Mile,” said Baker.
When questioned about the impact of the Mayor’s office, the most positive response was on security which is perceived as having the most beneficial gain followed by transport. The response regarding the impact on planning was mixed with 52% of respondents citing the Mayor has had a positive effect overall. In contrast, 63% of respondents cited the Mayor has had a negative impact by introducing the Congestion Charge.
Baker concluded: “Our extensive study of occupier trends within the central London office market has given an interesting insight into the current thinking of major central London occupiers. It will be interesting to repeat the same exercise once we have come out of the current economic uncertainty.”
For further information, please contact:
Bradley Baker
Head of central London Tenant Tepresentation
Knight Frank
T: +44 (0)20 7861 1256
Olivia Gallimore
PR manager
Knight Frank
T: +44 (0)20 7861 1035
Notes to Editors
Knight Frank LLP is the leading independent global property consultancy. Headquartered in London, Knight Frank and its New York-based global partner, Newmark Knight Frank, operate from 196 offices, in 38 countries, across six continents. More than 6,770 professionals handle in excess of US$700 billion (almost £355 billion) worth of commercial, agricultural and residential real estate annually, advising clients ranging from individual owners and buyers to major developers, investors and corporate tenants. For further information about the Company, please visit www.knightfrank.com.