Occupational trends driving expansion of Midtown
14 April 2015
Occupational trends are driving the expansion of Midtown, with Smithfield, Clerkenwell and Farringdon all now within the market’s parameters according to new research by Farebrother.
In its anaylsis of the first quarter of 2015, Farebrother has extended Midtown’s eastern boundary to Goswell Road, Aldersgate Street and New Change to encompass greater proportions of EC1 and EC4, adding over 11 million sq ft of office stock. This reflects occupier sentiment, with many identifying this area – characterised by predominantly secondhand, refurbished office stock, low vacancy rates and a diverse occupier base drawn largely from design, creative and technology sectors - as part of Midtown as opposed to a part of the City or City Fringe markets.
Malcolm Brackley, Partner at Farebrother, said:
“Midtown’s renaissance has been well-documented, and we feel that not only is the market evolving, it is expanding. Markets change and at Farebrother, we continue to monitor and revaluate how the market is perceived by investors, owners and the occupier base.
For years Midtown was an overspill location, dominated by the public sector and professional services sectors. Now, it is attracting high volumes of what we call ‘DAMIT’ occupiers – Design, Advertising, Media, Internet and Technology businesses – as locations like Clerkenwell and Farringdon traditionally have. The consistency of the occupier-base, similar profile of office stock, leasing trends, mix of uses and the integrated physical environments makes it logical we consider these areas part of Midtown.”
Take-up across the extended market, which encompasses 43 million sq ft of office stock, was robust in the first quarter with Deloitte’s recent pre-let of the 275,000 sq ft 1 New Street Square, EC4, contributing to a total of 601,195 sq ft.
However, this total is slightly below the ten-year quarterly average of 693,307 sq ft, underlining that across the entire Midtown market there remains a paucity of office stock, with Availability at just 3.3%.
Jules Hind, Partner at Farebrother, added:
“It has been obvious to us for some time that demand is outstripping supply in Midtown, and we can expect activity over the rest of 2015 to follow a similar pattern as it has in the first quarter. Take-up will be Pre-let driven, and we will see early commitments on the majority of available space under construction.
The £10 million invested by the owners of 120 Holborn, EC1, to reposition the building is well-timed. The scheme delivers 101,000 sq ft of much-needed office space, and refurbished schemes of this nature, close to Midtown’s transport hub at Farringdon, will attract very strong interest.”
The supply-demand dynamics in Midtown are driving strong investor interest, with twenty six transactions in the first quarter, totalling £688 million. Overseas investors continue to account for the majority of purchases across the market [60%], which interest focused on those assets where there is an option to drive values through refurbishment.
Alastair Hilton, Partner at Farebrother, added:
“Competition for Real Estate Assets across Central London remains very strong. Set against this, Midtown offers long term strategic value due to its Central London position, underpinned by the ongoing infrastructure projects. As a result the competition is considerable particularly, from overseas investors who are keen to increase their exposure in Midtown. However, whilst the illiquidity in the market is starting to prove a deterrent for some, it is not having a detrimental impact on pricing, which remains very strong.”