News & Insights
The asking rent figures have decreased, but not by as much as many had predicted. Valuers of London office space have only reduced the average asking rent by 0.3% since before the pandemic. This comes as 20 million sq ft of office space is reported to be available in the capital, an escalation from the ten-year average of 14 million sq ft.
Whilst office staff have been working from home during the COVID-19 pandemic, the need for office space in London seems to have gradually diminished. This is reflected in the huge amount of space currently available.
The Daily Mail has reported that some commercial landlords believe that the marginal reduction in the average asking rent may be too optimistic. For example, Lord Matthew Oakshott of Olim Property believes that property surveyors have not been keeping up to date with developments during the pandemic and this has resulted in an inappropriate rent level being issued. This has then contributed to an increase in available offices and a reduced appetite for the space amongst prospective tenants put off by these stagnant rent levels.
On the other hand, the valuers themselves consider that there is sufficient demand for office space incorporating specific amenities that have been adapted to a post-COVID world. Nick Knight of CBRE has pointed out that trends such as hot-desking and secure work environments will become the new norm in the commercial property market. Furthermore, he suggests the eventual frustrations of working from home will create the need for staff to return to offices in order to achieve optimal productivity.
However, a separate inquiry made by the Institute of Directors shows that nearly three-quarters of businesses will continue to provide a choice to their employees if they wish to work from home as an alternative to a central office. Many in the industry are therefore worried that, if this trend is set to continue, the office as we know it may have a bleak future.
The Royal Institute of Chartered Surveyors (RICS) has estimated that 78% of surveyors regard the commercial property market as currently being in a downturn. However, it can be noted that the industrial sector of commercial property has generally remained healthy, with a steady asking rent and much higher demand for space across the UK.
With office vacancy levels only set to increase further, it is a wonder why there has only been a 0.3% decrease of asking rent across London. Sooner or later, commercial Landlords will have to start dropping the asking rent level for their properties, in order to entice the thousands of traditionally office-based businesses back to London from their homes. However, the promise of a COVID-19 vaccine may just be enough for office landlords in the capital to hold off on announcing a rent reduction just yet.