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The lack of new buildings in these UK cities means that
TMT deals have on average been much smaller than in
the U.S. However, this has not been the case for banking
and finance occupiers, which typically took the biggest
spaces in Edinburgh and Glasgow in 2014–15 (see
Exhibit 6). Notable deals in these cities included those
by Blackrock, JP Morgan, Morgan Stanley, and AIG, all
big U.S. financial players.
Developers and investors are responding to occupier
demand with a wave of new buildings and refurbishments.
CoStar data shows that Seattle, San Francisco,
Manchester, Washington, D.C., and Birmingham are due
for the largest proportionate increase in office stock
over the next few years (see Exhibit 7). Washington,
D.C., is set to see the largest absolute increase (8.5
million SF), followed by Seattle (6.9 million SF) and
Boston (6.3 million). The UK city development pipeline
is much smaller and is led by Manchester (1.4 million
SF), although it is set to experience the third-highest
proportionate increase of the cities assessed. This
development will increase the quantity and quality of
office stock and underpin attractiveness.
In terms of inter-regional competition between U.S. and
UK cities, British government policy is arguably making
an even bigger impact by encouraging a wave of U.S.
to UK relocations. This has been underpinned by tax
changes, especially reductions in the corporate tax rate
to 20% compared to a U.S. rate of 35%. U.S. companies
have also been keen to use overseas cash to fund such
moves rather than repatriating it back home, where
it would be taxed. Examples of companies that have
moved their tax base to the UK include Aon Plc, CNH
Global N.V., Delphi Automotive Plc, Ensco Plc, Liberty
Global Plc, and Noble Corp. Plc.
EXHIBIT 6: AVERAGE DEAL SIZE BY TMT AND BANKING
AND FINANCE, 2014–15
TMT
BANKING AND FINANCE
CITY
AVG DEAL
SIZE CITY
AVG DEAL
SIZE
Seattle
42,533 Edinburgh
40,193
San Francisco
24,322 Bristol
33,026
Los Angeles
22,564 Washington, D.C.
28,799
Boston
22,508 Los Angeles
27,404
Chicago
17,748 Chicago
26,800
Washington, D.C.
16,069 Seattle
23,911
Birmingham
8,970 Boston
23,188
Edinburgh
8,740 Birmingham
22,629
Bristol
8,544 San Francisco
19,603
Manchester
8,161 Glasgow
15,128
Leeds
6,331 Leeds
14,696
Glasgow
6,329 Manchester
13,783
SOURCE: COSTAR GROUP AS OF 16Q1
EXHIBIT 7: % OF CURRENT OFFICE STOCK UNDER
CONSTRUCTION, 2016–18
SOURCE: COSTAR GROUP AS OF 16Q1
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
Los Angeles
Chicago
Leeds
San Francisco
Washington D.C.
Boston
Seattle
Bristol
Glasgow
Manchester
Birmingham
Edinburgh
24 | Cushman &Wakefield