Given the dynamics within the Docklands office submarket, one always expects statistical fluctuations in take-up and availability. But for the sixth successive London Office Market Analysis, I’ve been a little taken aback by what is happening (or, more pointedly, not happening).
A slow quarter or two can often be explained by the fact that there simply isn’t the requisite supply of adequate stock, or that large deals are just around the corner, waiting to filter through and boost figures for both E14 and the wider London market.
What explanation can be offered, therefore, when you get a spell of 18 months in which the market often performs below its traditional level on the occupational side of things, and lower-grade availability keeps creeping upwards?
Fall in take-up
Figures from Radius Data Exchange indicate that over the past year and a half, Docklands has not been pulling its weight in terms of occupational activity across London.
Around 9% of the office stock in the central area of the capital resides in E14 – and that was Docklands’ share of London take-up by square footage from 2007-2016, averaging 290,000 sq ft per quarter.
Click here to see the full London Office Market Analysis for Q2 2018
Since 2017, however, Docklands has only commanded 3% of overall take-up, averaging 104,000 sq ft per quarter.
In addition, there is 2.1m sq ft of second-hand availability – an increase of more than 200% on where the figure stood at the end of 2015 (no other London submarket has seen a bigger proportionate rise), and is the third time in the last four quarterly analyses that the figure has been above 2m sq ft – an unprecedented consistency of high volume second-hand space.
Is this just a blip, soon to be rectified? Or snowballing statistical symptoms of a submarket in need of a wider, holistic makeover at risk from the financial services sector’s caution surrounding Brexit?
Occupier mix
We know that occupiers are more footloose than they have been in the past.
The City Corporation has been at pains to broadcast this message of welcoming diversity within the Square Mile, for example, releasing its Tech and the City report last spring.
Is there a similar desire to differentiate the Docklands’ occupier mix? If not, should there be?
It is the submarket with the most acute reliance on the continued occupation of a single sector, with financial operators currently comprising over 55% of all office space – and given that financial passporting concerns remain largely unanswered just eight months away from the UK’s separation from the EU and (most likely) the single market, there will almost certainly need to be an effort to diversify the area’s tenant appeal.
Competition
Likewise, has there been a specific response to increased competition for cheaper large-scale office suites in London?
Stratford in particular has emerged as an alternative for those bigger individual occupiers’ requirements in recent years – in addition to developing fringe areas such as White City and Battersea, which naturally would impact Docklands’ stats in a more meaningful way than other areas of London which aren’t quite as reliant on those mega-deals.
ABP’s project to create a new business district in the neighbouring Albert and Victoria docks will provide additional competition. While the project is specifically targeting Asian businesses looking to set up European headquarters in London, that is still likely to reduce the pool of occupiers which otherwise may have been eyeing Docklands as somewhere to house their main UK presence.
All of these elements have coalesced to give the impression that Docklands is struggling slightly. Whether the opening of a Crossrail station later this year serves as any kind of panacea for these issues remains to be seen – but what is clear is that without a monopoly on relatively cheap access to central London, and an over-reliance on a single occupier type, there may be a need for that wider holistic makeover to stop Docklands becoming caught between the old and the new.
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