London Bounces Back. The Central London Fit Out Market Andy King Managing Director, Metropolis Property Research

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1 London Bounces Back The Central London Fit Out Market Andy King Managing Director, Metropolis Property Research 1

2 London Trends The Metropolis Property Research analysis of the London fit out market looks at all central London office deals involving the fit out (Cat B) of new space for named occupiers. The analysis identifies the Top 10 interior firms, namely architects, fit out contractors, and project managers, involved with projects over the five-year period. The total take-up of all office space in central London between has been just over 50m sq ft, and large deals (over 20,000 sq ft), which form the basis for the Top 10 research, amounted to 32m sq ft, or about 64% of the total. The five-year analysis period covers a turning point in the property cycle, with the downturn, following the collapse of Lehman Brothers, and the subsequent recession. After a four-year slide, and against expectations, 2010 saw a significant upturn in occupier take-up to levels not seen for a decade. Overall take up for 2010 was about 12m sq ft, of which about 9.1m sq ft was made up of large deals (over 20,000 sq ft), a rise of 5.2m sq ft on the previous year. Nearly 50% of these deals were in the last four months of the year and comprised some major pre-lets. Major London Deals (over 20,000 sq ft)

3 The Interior Architect Market: The Rise of TP Bennett The Top 10 Interior Architect Rankings for the combined totals for are as follows (last years position in brackets): Interior Architects Top 10 Ranking 1. Pringle Brandon (1) 2. Gensler (3) 3. TP Bennett (5) 4. MCM (2) 5. Swanke Hayden Connell (4) 6. HOK (6) 7. TTSP (8) 8. Building Design Partnership (BDP) (10) 9. Woods Bagot (-) 10. Kohn Pederson Fox (9) Those firms in the Top 10 have over the last five-years completed, or have underway, 14.3m sq ft of interior projects, which comprises 44% of all office projects in central London reviewed as part of the research. The Top 10 Architect Ranking again sees Pringle Brandon in No1 place, but the firm is now being closely challenged by both Gensler and TP Bennett. TP Bennett has moved up two places, and nearly claimed second place in the Ranking, following a surge in interior projects in Gensler has moved up one place helped by the current JP Morgan fit-out projects. The top three firms dominate the major projects (Cat B) in central London with 50% of interior design work. TTSP and BDP have risen in the Ranking and HOK has held sixth place. MCM, Swanke Hayden Connell and KPF have slipped places, and Woods Bagot returns to the Ranking after a brief absence last year. 3

4 Architect market share BDP 5% KPF 4% Woods Bagot 4% Pringle Brandon 18% TTSP 6% HOK 8% Gensler 16% Swanke Hayden Connell 11% MCM 12% TP Bennett 16% Source: Metropolis Property Research ( 4

5 The Contractor Fit-Out Market: Competition increases The Top 10 Interior Fit-Out Rankings for are (previous positions in brackets): Interior Contractor Top 10 Ranking 1. Overbury (1) 2. ISG (2) 3. Como (3) 4. StructureTone (5) 5. 8Build (4) 6. BW Interiors (7) 7. Ibex (6) 8. Mitie (-) 9. Bovis Lend Lease (9) 10. Collins Construction (-) Source: Metropolis Property Research ( Those firms in the Top 10 have dealt with, or are dealing with just over 14.2m sq ft of 'live' or recent interior projects, which comprise 44% of all office projects in central London reviewed as part of this research. Overbury is again at the top of the Ranking and has seen a slight increase (+1%) in its market share to 33% over the year. ISG's market share has increased by 3% and is now 24% and Como has also seen an increase in its market share to 14%. The top three firms now account for 71% of major fit out projects (Cat B) in central London, an increase of 5% share on last year. In the mid-range of the Ranking there has been some repositioning, with StructureTone, and BW Interiors increasing market share slightly, both up by one place, and 8Build and Ibex both being one place down on last year. Bovis Lend Lease has remained in ninth place. Mitie and Collins Construction are new entrants to the Ranking mainly due to a significant increase in projects in The total market share of the Top 10 firms has remained at the same level as last year (at 14m sq ft) despite record take-up levels in 2010, perhaps partly a sign of increasing competition in the fitout market. A large proportion of take-up in 2010 was in the last part of the year, and several major pre-let projects are still some way from appearing as fit-out contracts. In addition there was a doubling in the number of 'mid-range' projects (20,000 sq ft to 40,000 sq ft), which were carried out by an ever 5

6 expanding range of fit-out firms, including Parkeray, Wates, Chorus, OPL, Faithdean, and Knight Harwood, which are possible contenders to join (or rejoin) the Top 10 Fit Out Ranking. Overall, the fit out market has a potential of 6.0m sq ft in central London. This is made up of 2.3m of 'live' fit out projects where a contractor still needs to be appointed, and an additional 3.7m sq ft of 'potential' fit out projects, where the development has not yet started, and occupier deals are "under offer" but not yet finalised. Contractor market share Collins Construction 2% BW Interiors 5% Ibex 4% Mitie 3% Bovis 2% Overbury 33% 8Build 5% StructureTone 8% Como 14% ISG 24% Source: Metropolis Property Research ( 6

7 Project Managers: Two firms fight it out The Top 10 Interior Project Manager Rankings for are (previous positions in brackets): Interior Project Manager Top 10 Ranking 1. Turner & Townsend (3) 2. Gardiner & Theobald (1) 3. EC Harris (2) 4. Davis Langdon (10) 5. Arcadis (9) 6. Mouchel (-) 7. Jones Lang LaSalle (-) 8. Buro Four (B4) (-) 9. Cushman & Wakefield (-) 10. Allen Stewart Harrington (-) Source: Metropolis Property Research ( Those firms in the Top 10 have dealt with, or are dealing with just over 10.1m sq ft of 'live' or recent interior projects, which comprise 32% of all office projects in central London reviewed as part of this research. Turner & Townsend has moved up to top place, just overtaking Gardiner & Theobald (GTMS), with 21% market share. EC Harris and Davis Langdon have had a successful year and hold their places in the top four. The top four firms now account for 67% of the major fit out projects (Cat B) in central London. Arcadis moves up to fifth place from ninth but Cushman & Wakefield has dropped to ninth place. Mouchel moves into the ranking because of the Nomura fit-out; and Jones Lang LaSalle, Buro Four (B4), and Allen Stewart Harrington have also joined the Ranking this year. 7

8 Project Manager market share Allen Stewart Harrington 4% Cushman & Wakefield 5% Turner & Townsend 21% Jones Lang LaSalle 6% Buro Four (B4) 5% Mouchel 6% Arcadis 7% GTMS 20% Davis Langdon 12% EC Harris 14% Source: Metropolis Property Research ( 8

9 London: 'Mini-Boom' About to End? Last year in London was a better year than perhaps most people expected. Market activity in 2010 was much like 2009 with a surge of office deals in the last quarter of the year and several big prelet signings. The London fit-out market has a current potential of about 6.0m sq ft of 'live' occupier projects where a fit-out contractor still needs to be appointed. However, around 2.0m sq ft is in pre-let projects that will not complete until late 2013 at best. In terms of 'immediate' projects there is thought to be about 2.3m sq ft in large deals completed in 2010 and 2011 (so far) still requiring a fit out contractor to be appointed. There is also estimated to be about 1.7m sq ft of office space under offer, which should be signed in the next few months. This London market may, however, be on the point of 'downsizing', with the average size (sq ft) of deals in 2011 likely to be much smaller than last year. Most 'iconic' office space has disappeared from the market and occupiers requiring 'prime' space will now have to pre-let or wait until the proposed new developments come on stream. It is expected that the bulk of the office activity in 2011 will be in deals under 50,000 sq ft, exactly where the competition for fit-out work is most fierce. The fit out market for larger projects will focus on upgrading occupiers existing space through restacking and refurbishment, and adding-value to developers and owners un-let office space. Retrofit will become the 'buzz' word for 2011 and The good news is that currently we seem to be in a mini 'boom' for occupier fit-out, the bad news is that it could all be slowing down later this year, but just at the point office development takes off. 9

10 About Andy King Andy King is Managing Director of Metropolis Property Research and a Director of CityOffices.net For further information on Metropolis Movers research and CityOffices.net research on central London and UK regional cities please visit: Notes This research into the central London interior fit out market by Metropolis Property Research has been prepared for MIPIM March As part of this research Metropolis has identified the office deals and fit out projects in central London for the period 2006 to 2010 and used every endeavour to identify the project teams. The research covers fit out (Cat B) projects of over 1,858 sq m (20,000 sq ft) for office buildings completed, under construction, or pre-let. It has been prepared in consultation with firms involved on central London projects. The information and analysis in this report has been rigorously checked and is, as far as possible, correct at the time of going to press. Metropolis Property Research Ltd can take no responsibility for any damage or loss suffered as a result of any inadvertent inaccuracy within this report. The report should not be relied upon as a basis for entering into any transactions without seeking specific, qualified, professional advice. No part of the report should be published, reproduced or referred to, without the prior approval of the author. Any such reproduction should be credited. 10