occupier
SPOTLIGHT insurance
T
here’s been something of a party going on in London’s EC3 postal district. Bopping to the contrapuntal beat of cranes building new offices and energetic trading at Lloyd’s of London, insurance occupiers have been upping the tempo on
new lease signings. In the year to May 2013 the insurance sector accounted for a whopping 900,000 sq ft (much of it prelet) in new space alone. “London has always been the home
of insurance and it is the centre of the global insurance industry. Lloyd’s is based here, the regulator is based here and government is based here – that’s why insurance companies also want to be based here,” says Graeme Trudgill, head of corporate affairs at the British Insurance Brokers’ Association (BIBA). The world’s 20 largest underwriting firms have offices in the capital and both underwriters and brokers cluster around the Lloyd’s Building in EC3, something that is unlikely to change in the foreseeable future. Unlike personal insurance, commercial insurance has proved largely immune
to screen-based trading. “The large sums and technical complexities involved mean that business is still very much face-to-face,” says Trudgill. But while the need for insurers to be
located around EC3 is arguably a given, the need to take spanking new space is not. Why? “Generally, insurance is a frugal industry, and much more conservative than the rest of the financial services sector. These companies aren’t looking to show off with fancy offices – they don’t need to,” says David Law, director at Savills, who has recently advised a number of insurance firms. So the succession of underwriters piling into the two tower buildings: 20 Fenchurch Street and The Leadenhall building (see p28), both of which have been coming out of the ground in EC3 in the past 18 months, seems to have taken the market by surprise. Some claim that landlords had no idea that an insurance wave was coming, and were astonished that insurers were willing to pay up to £75 per sq ft. However, they shouldn’t get used to the idea. “Take-up in 2012 was really unusual. It came about because last year was the strongest ever for the Lloyd’s market, and it coincided with lease expiries and the supply of tall buildings that happen to be nearby,” says Law. In other words: forget any hopes that insurance will, like TMT, become a hotbed of leasing activity for the future. Mark McAllister, head of Colliers
International’s City office, agrees: “Underwriters and brokers don’t want to spend £60 per sq ft on rent, so most will be quite comfortable staying where they’ve always been – and bear in mind that brokers are out of the office half the day in any case.” A quick glance at future insurance
sector requirements shows that only 240,000 sq ft of major straight lease deals are on the radar, the largest
8 June 2013
www.estatesgazette.com
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