London businesses are set to take over an additional 13 million square feet of office space in the capital over the next five years, according to research from commercial property experts CB Richard Ellis (CBRE).
The forecast for commercial space in 2021 looks positive, despite significant changes in the way employees work. More companies are planning to encourage a hybrid working model – including working from home and in an office. There is a call for more office space in which to collaborate with those working from home over video calls.
Jennet Siebrits, Head of UK Research at CBRE, said: “Investment picked up markedly in Q4, with £4.3 billion of deals completed. This does signify the market is attractive to investors. Overall, we think office space will be up by 20% or so. There are several reasons for this. We think office investment remains the weight of money that is seeking yield. UK offices also offer value compared to other European countries. The UK has quite a friendly landlord leasehold structure. Long leases can provide stable and predictable growing income. The size of the office market gives investors the ability to deploy large sums.”
Siebrits also explains that hybrid working won’t necessarily mean a fall in the uptake of office space by businesses and investors: “This [hybrid model] may well reduce the average days in the office, but not office demand. Investors will look at peak occupancy days rather than average occupancy days.”
Speaking to New London Architecture (NLA) after the research was published, Siebrits continued: “The pandemic has re-focused corporate occupiers, and issues such as health and wellness are becoming increasingly important. At least in the short-term, employees are unlikely to accept working conditions that involve sitting in extreme proximity to their colleagues for the entire working day.
“In the future I think having offices in locations where people are going to want to travel to will be a predominant choice for occupiers, places with good transport links and good amenities are likely to be more important.”
Retail sectors, although seeing an increase in empty commercial spaces due to the economic impact of the pandemic, is predicted to grow after lockdown restrictions are lifted.
Experts say the excess of retail space will create opportunities for the repositioning of assets. The vaccination roll-out means consumers could be more willing to return to stores and indulge in “revenge” spending. Although consumers are now used to purchasing online, retail outlets will need to adapt to a more omnichannel approach to distribution. For example, food retailers will need space for click and collect services, continued social distancing and more. This experimental period will be very important for the commercial office space market going forward.
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