Source: Savills Research, Company Data
■ It is crucial that there is sufficient office space available that will allow these companies to expand. In certain smaller markets, there has been limited amounts of development which has resulted in companies located in these areas having to relocate to expand. If there continues to be limited new development, especially in smaller markets this could limit employment growth. An example of this theme occurring in recent years is Permasense who relocated from Horsham to Crawley after being acquired by Emerson Electric, they leased 12,644 sq ft at Alexander House.
■ However, where new development has taken place it is positive news that occupiers are willing to move to expand as it increases the potential target area for new tenants to be targeted. Whilst moves over large distances are relatively rare, due to the fear of losing staff, occupiers can be footloose especially if their workforce is predominantly car borne. Savills research, “How Far are Occupiers Moving?” report, released in 2016, uncovered that between 2010–15, occupiers moved an average of 6.9 miles for Grade A office space over 20,000 sq ft, in the Greater London & South East office market.
■ Developers and investors could potentially capitalise on the new investment into occupiers by speculatively developing in the market. There has been £21bn invested into companies in 2017, which will drive demand going forward which was highlighted by Autolus based in White City, who are a startup drug development company who received £60.9m of funding in 2017 and currently have a 25,000–40,000 sq ft requirement.
■ There is currently limited speculative development taking place in the market which is depicted in the map below. This is most notable in Northern and Southern sectors with only four schemes either under construction or been announced. This could create a problem in the medium term when considering that £31bn has been invested into companies since 2015 in these market areas. Occupiers may be unable to expand in these geographic areas due to the limited speculative development pipeline. Furthermore when you consider pre-let deals are extremely rare in the market with the long term average of annual deals recorded in the market being pre-let is only 0.9%, the case for speculative development is heightened. Therefore we believe that the investment into companies should give developers and investors confidence when considering speculatively developing in the market.