All change in the heart of the City

What brings together one of the world’s biggest tech companies, a stock exchange giant, a Norwegian renewable energy firm and others, and lets staff from all bump into each other on a climbing window more than 100 metres above the streets of London? Here’s a hint: it’s 62 storeys high and will be open in a matter of weeks. The City of London’s tallest tower yet, 22 Bishopsgate has dominated the Square Mile’s skyline during its construction. It has also dominated letting agents’ discussions about the post-Brexit health of the capital’s office market. Its amenities, including London’s highest climbing wall, a food hall and a tech system that the owners say will make it the smartest building in Europe, have attracted prelets from companies including Apple, Nasdaq and Norway’s Statkraft. As its opening nears – Harry Badham, part-owner Axa Investment Management Real Estates’ UK head of development, says 3,000 workers will have moved in by summer – it will be watched keenly as confirmation of demand for top office space, as well as demonstrating the growing variety of tenant types a property in London’s oldest office market can now target. It will not be alone in that respect. Also attracting attention are buildings including 22’s nearby neighbour 100 Bishopsgate, a Brookfield-owned building that has wooed magic circle law firm Freshfields Bruckhaus Deringer away from Fleet Street after three decades. Karl Wambach, executive vice president for Europe at Brookfield, says the tower was 83% leased by completion, claiming this set a record for a prelet building in the City. Over the coming months and years, these and other developments [see map] should bring a fresh mix of occupiers and a new lease of life to a part of the capital determined to reinvent itself. Leasing activity in the City core’s office market surged at the end of last year. According to EG’s quarterly London Office Market Analysis, based on figures from Radius Data Exchange, the submarket saw the largest amount of new space taken in the capital during the final three months of 2019, thanks to deals for Monzo Bank at 5 Appold Street, EC2, and for serviced office operator Convene at 80 Fenchurch Street, EC3. In total, more than 1.3m sq ft of leasing deals were struck by tenants in the year-end rush, up by 12.5% on the third quarter and a rise of a third on the five-year quarterly average. Companies are continuing to rush to snap up space well ahead of completion. The City core’s speculative office development pipeline sits at 2.5m sq ft under construction, according to Cushman & Wakefield, but 57% of space due to complete in 2020 is already prelet or under offer. For space under construction and due to complete in 2021, that figure rises to 80%. With close to 10m sq ft of active requirements from occupiers in the market, a supply/demand imbalance is unlikely to let up soon. “We will see real competition for the best schemes being delivered into the market in the next 24 months or so, resulting in landlords increasing rental level expectations,” says Andrew Parker, international partner in Cushman & Wakefield’s London leasing team. Beyond bankers Despite being steeped in historical traditions as London’s financial heartland, the City’s buildings, spaces and occupier mix are changing rapidly. Although financial services firm such as investment banks and asset managers remain a crucial part of the office market, authorities and landlords alike have been keen to encourage a broader mix of tenants as Brexit raises questions over London’s future as a financial hub. James Stevens, head of development at Aviva Investors, which will build a new office scheme at Liverpool Street Station in the next wave of City development, believes the area’s “physical landscape can respond to changes much more proactively and quickly and aggressively than perhaps other parts of London”. This has meant that it has been able to evolve rapidly over the last 10 years, Stevens says, ramping up its amenity offering and innovating with its public realm. The type of people that had typically been put off working in the City are now being attracted to it by virtue of its connection to Shoreditch and Spitalfields – James Stevens, Aviva Investors Aviva has already fielded enquiries from occupiers all over London, Stevens says. Younger workers often now live to the east of London, he adds, rather than to the south west, and for employers ensconced in the war for talent, buildings in the City core are now more appealing and marketable as a result of the connectivity that will come with Crossrail. “The type of people that had typically been put off working in the City are now being attracted to it by virtue of its connection to Shoreditch and Spitalfields,” Stevens says. “Most big organisations now require the same creative and tech talent that was typically associated with a certain part of the private economy, and therefore the City core is benefiting from this.” David Lockyer, who runs British Land’s Broadgate campus, says he has seen first-hand that merging of the tech sector and the traditional financial occupiers. Although still best known as the London home of Swiss investment bank UBS, revamped offices at Broadgate have more recently welcomed companies such as Mimecast, an email and data security company that might once have found a more suitable home in nearby Shoreditch. Designing for tomorrow Increasing interest from occupiers does not mean that developers can sit back with a ‘build it and they will come’ approach. As the tenant mix is changing, so too are the buildings. “We’ve changed our approach and design teams to look at it from what a West End occupier typically looks at,” says Aviva’s Stevens. “Internal volume in a building and light, those are physical fundamentals you can’t undo and which we think from a wellness perspective are two of the most significant drivers, so we’re trying to push floor to ceiling heights beyond British Council for Offices standard.” The days of having big trading floors and monolithic brutal buildings is over. We want places for people to enjoy. For people to experience cultural things, for people to experience quiet space – Alastair Moss, City of London Corporation British Land too has changed its design focus. “The things that we do now, we wouldn’t have done a few years ago,” Lockyer says. “[It’s] designing for the people who work here, live here, shop here. And it’s designing places that don’t feel designed, that feel natural.” Lockyer adds that controlling the public realm at Broadgate as well as the buildings allows the company to “truly placemake”, which he believes has helped in the speed and scale of leasing success achieved at the campus in recent years. Occupiers, he says, want buildings in which their staff “can be productive, can be healthy, can be happy”. “As a result of that, they can be more productive as a business,” he adds. “And they want somewhere that reflects their brand – people have been more focused on the impact real estate has on what it says about them as a business.” Over the next five years the amount of retail and food and beverage space at Broadgate is set to rise from 110,000 sq ft to more than 500,000 sq ft. British Land is also creating a new park at Exchange Square, which the company hopes will provide a tranquil spot for workers and visitors to relax. It is not only office buildings springing up in the City core. The submarket has also attracted the Pan Pacific Hotels Group, which will open its first hotel in Europe within a purpose-built tower on Bishopsgate by the end of the year. Anne Golden, general manager for Pan Pacific London, says it was “a natural destination for us to plant our first Pan Pacific brand flag in Europe”, adding: “This location in the heart of the City is unbeatable”. The area’s transport links and easy access to London City Airport and Heathrow, which will be further boosted by Crossrail, were also a draw, Golden said. The hotel will have 237-rooms as well as a 380-capacity ballroom venue, a first for the City core. Coming attractions The evolution of the City core and its cluster of towers will not finish with the impending new buildings. Several of the area’s investors have banded together to create a business improvement district, aimed at helping the City of London Corporation make its vision of a 24/7 City a reality. The BID, in turn, has the backing of the corporation, which has joined up as a funding partner for the next two years. “The City has to attract talent from around the world and, in order to attract talent, you have to have good things for people to experience – and they want far more than just good offices,” says Alastair Moss, chair of the City of London Corporation’s planning and transportation committee, pointing to initiatives such as the Culture Mile stretching from Holborn Viaduct to Moorgate. “The days of having big trading floors and monolithic brutal buildings is over. We want places for people to enjoy. For people to experience cultural things, for people to experience quiet space. For them to have good transport networks, to better walk and cycle well, and to breathe good quality air.” The next wave of new developments is already in the offing, including Mitsubishi Estate London’s 8 Bishopsgate, Brookfield’s 1 Leadenhall and M&G and Nuveen’s 40 Leadenhall. Plans are also afoot for a tower at 70 Gracechurch Street and to turn Aviva’s base at 1 Undershaft into the tallest building in London. The City skyline isn’t done changing yet – and neither is the mix of companies making their home in its shiniest new towers. To send feedback, e-mail louise.dransfield@egi.co.uk or tweet @DransfieldL or @estatesgazette