Is EG bucking the trend by moving to EC2?

COMMENT: It’s finally happened. The deal the entire London office market was waiting for, writes Graham Shone, senior analyst, EG. Yes, you’ve guessed it – EG parent company RELX has announced that its new central London home will be 99 Bishopsgate, EC2 (pictured), putting an end to months of speculation around the watercoolers at EG Towers at 110 High Holborn, WC1. We are leaving Midtown next year for the delights of the City – and figures from Radius Data Exchange suggest that for EG, as a media and data company, this is a move that goes somewhat against the grain in a pure geographical sense. Take-up figures from the City Core market show that deals for tech, media and telecommunications companies have been falling in overall transactional volume terms for the past four years. Deals peaked at 77 individual transactions in 2014. In the same year the largest volume of TMT companies in the past decade vacated office space in Midtown. Radius Data Exchange shows 120 individual businesses moving away from Midtown in 2014, a number that fell to just 82 last year. So are we going the “wrong way” as a media company? Not really. Our impending move to the City is simply further evidence of the increasingly porous and democratised nature of London’s office environment, with firms considering geographical areas they may not have done previously as their requirements for business space evolve far beyond the standards of yesteryear. That evolution has thrown down the gauntlet to landlords, particularly those operating in the TMT sector that has underpinned so much of the London office market’s strong performance over recent years. It is this sector, perhaps, that needs more flexibility, in lease terms and spatial design, than any other business sector. One key trend is the shrinking influence of secondhand space on overall take-up volumes, a trend within which TMT is, predictably, proving hugely influential. Just 49% of all activity in H1 was in secondhand spaces – a decade low; while 26% of all TMT take-up so far this year has come in under-construction spaces – a decade high for the sector. There has been a concurrent response to this trend from landlords. Construction starts in the first half of 2018 have totalled just over 2.6m sq ft – more than in four out of the past five H1 periods. But this comes at a time when pre-construction availability is at record lows, despite the fact that more than 16m sq ft of office space is at permission stage across central London. A by-product of the TMT influence on central London’s office market is surely that conversations around new-build space are being dominated more by what can be done with the internal footprint as opposed to the benefits of the geographical location. This means that launching campaigns for new-builds with specifications already listed could be folly, as doing so might turn off a particular occupier group before construction has even begun. There is no sense in owners boxing themselves into a corner in this way while London’s office market is evolving so quickly. Landlords, therefore, are responding to that flexibility and specificity challenge by ensuring they can adapt their space to target multiple different business types. Our new space, for example, was previously occupied by a financial business. So, even though the stats on pure geography suggest we may be going against the grain, in another, wider sense, we are doing exactly what the London office market is suggesting we do: evolving. To send feedback, e-mail graham.shone@egi.co.uk or tweet @GShoneEG or @estatesgazette