The rising demand for high-quality office space by both investors and occupiers alike in the capital has been attributed in part to the relative lack of construction starts in what is undoubtedly the UK’s and one of Europe’s primary business centres.
Reflecting on its own data, the office space investment consultancy Gresham Down Capital Partners has noted that the global economic downturn has not been enough to dent the resilience of the commercial property and office space rental markets in London.
“Five weeks ago the fear was that there was too much stock on the market but the appetite of buyers has been voracious,” explained the company’s managing partner Stephen Down.
Mr Down went on to offer his advice to prospective investors in London office space: “First, stick to the very best in class – that is where the rental growth will provide the performance. Second, work with advisers who have a strong reputation for performance.”
Editor’s notes: Take-up through office lettings deals across central London totalled 10.1m square feet in 2022. This figure was 18 per cent higher than the previous year’s figure of 8.5m square feet, although marginally lower than the long-term annual average of 10.3 million square feet.
This indicated a good recovery from the effects of the pandemic.
Demand for high-quality prime office space in London increased following the pandemic as occupiers sought space that attracted employees back to the office following the introduction of flexible working models during and following the pandemic.
Occupiers, particularly in the banking & finance sectors, professional services sectors and technology, media, and telecom (TMT) sectors are increasingly seeking space with ESG credentials – this type of space is found within prime office stock.
It is expected that demand from the TMT sector will reduce in 2023 following job cuts rounds in high-tech firms that commenced in the Summer of 2022.
Speculative developments have decreased due to increased costs and inconsistent supplies of building materials and wider economic uncertainties.
It is anticipated that there will be steady growth in the supply of premium office stock in both the City and West End over the next five years, however, growth expectations have been scaled back in the short term.