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JLL

London office investment to hit £5bn in 1H 2019

Overall investment into Central London offices could total £5bn for the first half of 2019, down 39% on the same period in 2018 when £8.1bn was invested by the end of the half year. 

New research from retail estate advisor JLL suggests that a third of all transactions in 2019 to date came from UK investors.

Discussing the findings, Julian Sandbach, Head of Central London Capital Markets at JLL, said: “Political uncertainty is continuing to impact investor confidence at present, and this is most acutely felt by institutional investors who are particularly cautious due to uncertainty and understandably, risk. The irony of the situation is that the reverse is being seen in the occupational market where the volume of space let in the first half of 2019 is forecast to reach 4.3m sq ft, only 6% below the 10-year average.”

The research indicated that occupiers continue to show long-term confidence in Central London, recognising it as a global business centre, with global operators committing to space in the first six months of 2019, including Facebook, Sony Music, G research, Glencore, Milbank Tweed, ERBD and Brewin Dolphin. 

“London has a dwindling supply pipeline and although many cranes can be seen across its skyline a number of these developments have been pre-leased, with broadly 48% of the buildings under construction already let to future occupiers,” said Dan Burn, head of City agency at JLL. 

“The squeeze is more acutely felt with 2019 product where 59% of speculative construction is now leased. In addition, as occupiers vie for the best space, there is a significant amount of space currently under offer, totaling 3.8m sq ft which we anticipate will push leasing totals for the year towards 10m sq ft, in line with 2018. Looking ahead, the low levels of speculative pipeline combined with the sustained occupier demand, will continue the upward pressure on rental growth, especially as the vacancy rate on brand new buildings is 0.5%.”

Sandbach continued: “Undoubtedly the health of the leasing markets will provide an underlying level of confidence to investors, albeit much of this capital is sitting on the sidelines awaiting further clarification on Brexit outcomes. In 2018 inward investment was heavily dominated by Korean and Singaporean capital and whilst we have seen Korean investment recede from London this year, due to concerns from the securities firms to sell down their positions, we are yet to see a new international capital source emerge. Instead we have seen enhanced numbers of private individuals and family offices become more active, particularly in the West End, as a result of a reduction in levels of competition and a less crowded market and for the first time in many years UK buyers have been more active than any other group.

“Whilst investment transactional volumes are down, pricing levels have not suffered and yields have remained firm. The ever-decreasing supply pipeline coupled with strong levels of pre-leasing has led to intense competition for development and refurbishment opportunities across the capital. There is strong appetite from REITs, development managers and property companies seeking to reposition assets that will capitalise on the robust occupier demand and low future supply with pricing being driven hard by the strong competition.

“Furthermore, with London prime yields at an average of 4%, the arbitrage available over prime European cities at 3% is plain to see and for best in class assets, strong competition still exists.”

GVA and Apleona confirm separation

Independent commercial property agent GVA has announced a separation with management services company Apleona, allowing the two companies to focus on their respective core markets.

GVA chief executive Gerry Hughes said: “The separation is a significant development which gives us greater focus and control over the next phase of our growth. We now have a closer operational relationship with our shareholder, which will fast-track the delivery of our strategy.

“2017 was another strong year for GVA operationally and financially. As well as achieving our financial targets, we welcomed 25 new directors and senior directors to our business, and we are looking forward to accelerating our growth in 2018 and beyond.”

Andy Mottram, former member of JLL’s EMEA board, has been appointed chairman.

Discussing the move, Mottram said: “GVA is a great brand in the UK with a real sense of momentum. The firm offers a unique market proposition blending consultancy and transactional services across both the private and public sectors and its regional network is the envy of the market. I look forward to supporting Gerry and the team in the next phase of our journey.”

Increasing university commerciality will create further student housing partnerships…

A study by JLL’s Higher Education team has charted the rise of student housing partnerships between private sector operators and universities in the UK. 

Claiming to be the first to pull together comprehensive information on the student housing market, the study highlights the c. 27,000 new beds that these partnerships have created in the last 15 years, and the further c. 16,500 beds transferred from university portfolios. 

These partnerships have so far attracted £2.4 billion in capital investment and the number of partners has tripled in the last decade.

Robert Kingham, director in the management company’s Higher Education team, said: “As a market, the sector is maturing, evolving, and becoming more sophisticated. The scale of the challenge is huge. Universities own or lease a quarter of a million beds in the UK and we estimate that upwards of £5 billion is required to address their quality, in addition to creating more beds, to improve the student experience.”

JLL predicts a particular increase in the number of Design, Build, Finance and Operate (DBFO) schemes over the next five years, whereby a student housing partner takes a long lease of university-owned land, designs a scheme in conjunction with the university, raises finance, operates, builds, and takes the risk of finding occupants. In return, universities receive the expertise of a dedicated partner, a capital receipt and continued influence over creating a high-quality student experience. 

As a result, JLL expects universities who have not embarked upon this type of partnership before to look seriously at DBFO as an option. 

Martin Le Grice, head of Alternative Investment at JLL, added: “There is increased funder interest in the sector. This is partly driven by the opportunities in the DBFO and the emerging Strip Income markets, and the relative stability that Purpose Built Student Accommodation (PBSA) offers. When set against the difficulty in deploying equity, it demonstrates why funders are increasingly keen to enter what is currently a relatively closed market.”

The study concluded that affordability will be a major theme for all aspects of student accommodation over the next five years. This has become a priority concern for universities given the financial pressures on students, combined with high build costs and a lack of product which is driving up rents.

The full report can be downloaded here 

Greener office spaces boost bottom line and staff productivity, says WorldGBC…

A report from the World Green Building Council (WorldGBC) reveals the impact building owners, designers, developers and employers are having by investing in greener office spaces.

Released under the organisation’s ‘Better Places for People’ campaign, the document pinpoints the global drive behind implementing green and healthy office operation and design, and showcases 15 buildings that are ‘leading the way’. 

As a result of improving noise levels, layout, lighting and indoor air quality at its office in Doncaster, Skanska cut sick days by two-thirds; in turn saving the company £28,000 in staff costs in 2015.

Terri Wills, CEO of the WorldGBC said: “While our earlier work presented the overwhelming evidence between office design and improved health and wellbeing of workers, this report breaks new ground by demonstrating tangible action businesses are taking to improve their workspaces. The results are clear – putting both health and wellbeing, and the environment, at the heart of buildings, is a no brainer for businesses’ employees and the bottom line.”

The report identifies eight key factors in creating healthier and greener offices which can impact on the bottom line:

  1. Indoor air quality and ventilation – a well-ventilated office can double cognitive ability.
  2. Thermal comfort – staff performance can fall six per cent if offices are too hot and four per cent if they too cold.
  3. Daylighting and lighting– a study found workers in offices with windows got 46 minutes more sleep a night than workers without them.
  4. Noise and acoustics – noise distractions led to 66 per cent drop in performance and concentration.
  5. Interior layout and active design – flexible working helps staff to feel more in control of their workload and encourages loyalty.
  6. Biophilia and views – processing time at one call centre improved by sven-12 per cent when staff had a view of nature.
  7. Look and feel – visual appeal is a major factor in workplace satisfaction.
  8. Location and access to amenities – a Dutch cycle to work scheme saved €27m in absenteeism.

Beth Ambrose, director within the Upstream Sustainability Services team at JLL, and chair of the WorldGBC Offices Working Group added: “The business case for healthy buildings is being proven. All over the world, companies, both large and small, are redesigning their offices, changing working practices and trialling new technologies, to improve the wellbeing of their staff, tenants and customers.” 
Access the full document here

FM must digitalise to increase productivity, says JLL…

A recent report from the professional services and investment management company, JLL predicts that companies will continue to implement and embrace a digital facilities management approach; with new technologies changing how businesses handle workforce and facility operations becoming more available.

As workplaces progress to deliver additional flexibility, the ‘Reinventing Facilities Management for the Digital World report warns the FM sector must become a ‘digital business’ to meet rising expectations and demands – focusing on employees as ‘end-users of space’ and distributing an experience that is consistent to increase productivity and attract and retain the best talent.
To find out more and access the full report, click here

JLL awards Interserve with £60m FM contract…

The support services and management company, Interserve, has landed a three-year facilities management contract worth an estimated £60 million with the commercial and residential property services company, Jones Lang LaSalle (JLL).

Currently managing 60 shopping centres across the UK, the contract will see Interserve provide integrated facilities services to 18 of JLL’s shopping centres, and more than 300 people will TUPE transfer to Interserve to deliver security, customer services, cleaning, window cleaning, pest control and electronic security system maintenance.

Chief executive at Interserve, Adrian Ringrose, commented on the deal: “We have a strong relationship with JLL having provided a range of facilities management solutions to them for many years. We look forward to helping JLL create the best possible experience for visitors and employees at their nationwide shopping centres and workplaces across the capital.”