Tracking down suitable and affordable new premises is becoming increasingly difficult for all firms, reports Leo Schulz. Leo Schulz is a freelance journalist.
The rapid expansion of legal services over the past two-to-three years has created a serious push for space. As demand has risen and prices have increased, push has quickly come to shove. Over the past year, almost every month has seen a large firm making a major move.
In the City, Linklaters & Paines sent a large chunk of its IT systems, storage and support staff to Colchester, while moving 1,500 London staff into new premises on Silk street. Weil Gotshal & Manges has scooped three floors in the Heliport building in Moorgate and, in October, Hammond Suddards is moving its London office to larger accommodation in Devonshire square.
Lovell White Durrant and Nabarro Nathanson are both in the queue for new London premises. Dibb Lupton Alsop is reported to be hunting for 120,000 sq ft in the City, hoping to replace its four current premises. Slaughter and May, having expanded into an extra 60,000 sq ft in a fourth building in Coleman street in June, still needs to replace two of its existing buildings. “We are looking for at least another 250,000 sq ft,” says partner Jonathan Haw.
Meeting this demand is unlikely to be easy. According to Neal Scambler, City partner at chartered surveyors Jones Lang Wootton, there are only two completed grade A buildings in the City, comprising a total of 200, 000 sq ft. He expects them both to be under offer within the next 12 weeks. Building under construction totals 2.1 million sq ft, but in the current market that represents only six months' supply. After that, it will take two-to-three years for projects now at the application stage to become available for occupation.
Scambler expects £50 per sq ft to be the norm for lettings next year, with rent-free periods reduced to the minimum necessary for fitting out and “tenant break” clauses disappearing altogether. The West End is even tighter. Rod Fortune, a partner at estate agency Taylor Cavendish, says there are only six buildings available between Hammersmith and the West End and he expects this property drought to get worse. He says: “I see no sign of developers building for what people want.”
Firms are just as active in other regions. Eversheds has moved offices in Nottingham, while two weeks ago Masons in Manchester moved into 17,000 sq ft offices in Great Bridgewater, Barbirolli square. Addleshaw Booth & Co, which has also moved 550 staff into a new building in Leeds, is also in Great Bridgewater, and Dibbs has moved in next door.
Those facing a search for a large, new space at a desirable address have a considerable task on their hands. “It is all a matter of timing,” says Peter Griffith, director of administration at Weil Gotshal. His firm has acquired 40,000 sq ft of grade A space in the City's prime EC2 banking district, on a 20-year lease at £39.50 per sq ft, rent-free for the first 20 months.
In March, just as the market was turning, Hammond Suddards in London signed a 15-year lease on a 71,000 sq ft building, also in EC2. The rent on the building which the firm moves into in October is a modest £32.50 per sq ft. The rent-free period, says managing partner Gary Watson, is “very decent”. In EC1, Withers is paying £25 per sq ft for 14,500 sq ft in the KPMG building, spread across three floors, one of which is sublet for two years to Speechley Bircham. The space is additional to the 27,000 sq ft the firm has occupied since 1993 in Goth square.
Mark Jones, managing partner of Addleshaws in Leeds, started looking for new premises three years ago for the practice's corporate/commercial practice. The firm took a calculated risk in moving slightly out of Leeds' established business centre to Sovereign House, north of the river Aire. The £18m, 75,000 sq ft, purpose-built building was secured on a 20-year lease at only £16.50 per sq ft, £2 to £3 below the top rate normal in Leeds city centre.
With Asda, Yorkshire Water, Hilton Hotels and KPMG intending to move into the neighbourhood, the risk of moving out of centre has proved limited. “We are one of the biggest property practices outside London, so we had a feeling it would work out,” says Jones.
Peter Wood is national managing partner of Masons. He has no office. His private and personal space is a “pedestal” which can be pushed about.
When Masons moved this month into its new one-floor 17,000 sq ft premises at Great Bridgewater in Manchester, it decided to experiment with ideas of work and space.
“We wanted to organise the space around the nature of the work, not the status of the worker,” says partner Edward Davis, who also has no office. “When we sat down and thought about it, it was the assistants, who keep the papers, who needed offices.”
Of the 30 fee earners in the office, 10 volunteered to go without an office. Equipped with portable computers and cordless telephones, they are organised into a “club”, an area providing desks and settees. Each “club member” has a pigeon-hole where papers can be left and there is a “club secretary” whose job is, in part, to know where everyone is.
The club provides a space for picking up e-mail, informal meetings and minor correspondence, while other rooms can be booked for specific purposes. There is a room with a large table for work needing the use of many documents. Sound-proofed rooms provide space for concentrated work. Rooms with shelves and tables can be dedicated to a particular case.
“What we realised was that we could all have much better facilities if we were prepared to share them,” says Davis.