occupier
SPOTLIGHT insurance
of which is 80,000 sq ft for Chubb. In addition, German giant Munich Re is believed to be considering a purchase of up to 200,000 sq ft to consolidate the teams it houses in three buildings, totalling around 86,000 sq ft. A number of significant factors are
lurking on the horizon for insurance firms, however, and these are likely to heavily affect future deals. BIBA’s Trudgill believes that increased regulation, including the forthcoming Solvency II rules, is unlikely to have a significant impact on insurers, but that occupational costs will come under increased scrutiny, with further outsourcing of non-core functions to other UK centres likely. But it is the unexpected events that
bring about negative change in the insurance market as a whole that could bring the London leasing party to an immediate halt. Savills’ Law points to the collapse of original lettings at the Gherkin in 2005 as a direct result of the losses suffered from hurricanes Katrina, Rita and Wilma. London’s office landlords and letting agents will therefore be hoping for a decidedly uneventful 2013.
A TALE OF TWO TOWERS
London’s newest towers – The Leadenhall building, nicknamed the Cheesegrater, and 20 Fenchurch Street, also known as The Walkie Talkie – are both due to complete next year and appear to be neck and neck in the race to find tenants, all of which have so far come exclusively from the insurance sector. The 110,000 sq ft deal last month with Amlin at
British Land’s and Oxford Properties’ Cheesegrater means both buildings will be more than half full. The Cheesegrater started in pole position when
it landed AON back in 2011, but was overtaken by Land Securities’ and Canary Wharf Group’s Walkie Talkie after a flurry of lettings there last year. Amlin’s arrival at the Cheesegrater with its option on further space could see that building zoom into the lead once more. Although market commentators have expressed
reservations, the developers for both buildings are confident that more insurers will be taking office space in the towers. “That market has been pretty clear-sighted in what it wants to do,” says British Land’s head of London leasing, Paul Burgess. Lease expiries have so far been the main
driver, although a good proportion of brokers and underwriters have elected to stay put and simply extend their leases. But for some, that was no longer an option, says LandSec’s head of leasing, Kaela Fenn-Smith: “They felt their old buildings were no longer fit for purpose.” They also recognised that supply in EC3 was
limited, adds CWG’s head of leasing, Richard Archer. “Potential occupiers have been asking themselves: ‘who’s going to build another major building here in the current climate?’”
INSURANCE SECTOR IS RECORD-BREAKER
There is no question that 2012 was a record year for insurance sector take-up in central London, with the total reaching not far short of 0.75m sq ft, considerably higher than the eight-year annual average of 448,000 sq ft and accounting for 7% of all space taken in London that year. The vast majority have chosen to locate in and around the City’s EC3 postal district. Although several deals at the Walkie
Talkie boosted the 2012 tally, it was a different building, Minerva’s St Botolph on Houndsditch, that stole the show, securing Jardine Lloyd Thompson for over 280,000 sq ft – the largest single insurance sector deal in recent times. The JLT deal was very much an
exception, as there have only been a handful of large (around or above 100,000 sq ft) lettings in the last five years: AON’s decision to take 192,000 sq ft in the Cheesegrater in 2011 was preceeded by Allianz’s move
into 99,500 sq ft at 60 Gracechurch Street in 2010 and Catlin’s move into 119,000 sq ft at 20 Gracechurch Street the previous year. While the prelets for top-spec
space in the Walkie Talkie and Cheesegrater achieved rents of between £50 and £70 per sq ft, most of the space taken by insurance companies has been into secondhand accommodation where rents have been agreed at much less racy figures of between £20 and £40 per sq ft. Lease length data, where available,
shows that in recent years some firms have been willing to sign up for 10 years – even on secondhand space. But there have also been a large number of shorter deals (both sides of the normal five-year benchmark) as occupiers have deferred making a decision on whether to move and instead extended the leases on existing accommodation.
100% 90% 80% 70% 60% 50% 40% 30% 20%
10%
TOWER POWER HOW THE INSURERS’ SQUARE FOOTAGE MEASURES UP THE CHEESEGRATER
THE WALKIE TALKIE
100%
OCCUPIER AMLIN SQ FT 111,000
19% 6%
OCCUPIER AON SQ FT 192,000
33% 8 June 2013
AMLIN OPTION 36,000
11% 8% 4%
OCCUPIER ASCOT SQ FT 29,500
OCCUPIER MARKEL SQ FT 51,500
OCCUPIER ROYAL SUN ALLIANCE SQ FT 77,000
OCCUPIER RJ KILN SQ FT 78,000
17% 12%
OCCUPIER LIBERTY SQ FT 116,000
20% 30% 40% 50% 60% 70% 80% 90%
10%
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