Office availability in central London has risen by 51% since the end of 2019 to stand at its highest level in more than 15 years, according to CoStar Group, a leading provider of online real estate marketplaces, information and analytics in the property markets.
The 31 million square feet available as of August 2022 is up from a figure of circa 20 million square feet as the pandemic struck. It is also three million square feet above the peak of 28 million square feet reached in the aftermath of the financial crisis in mid-2009.
The pandemic and enforced pivot to home working led to a sharp drop in leasing plus a big rise in sublease availability in the early part of the crisis as firms sought to offload unused space. While this sublease trend has since subsided, as tenants have either taken back space or let leases expire, overall availability remains stubbornly high amid an ongoing pivot to hybrid working, sublease space being returned to landlords and new buildings beginning construction.
However, the market may be turning a corner, comments Mark Stansfield, senior director of UK market analytics at CoStar. “The availability increases recorded during 2020 and 2021 have levelled off this year which, together with other positive indicators such as rising take-up and stabilising void periods, suggest that the bulk of the pain is behind us.”
The growing ‘flight to quality’ trend should also support demand and rents in better-quality buildings.
Stansfield added: “It’s worth noting that while office space released onto the market significantly outweighed new leasing during the pandemic, CoStar data shows that all of the demand losses came in poorer-quality, 1 to 4 Star buildings (Grade B to C), with demand remaining positive in the best quality, 5 Star buildings throughout. Firms will likely continue to seek high-quality space to retain staff, welcome clients and meet growing ESG commitments, even if many take less space overall as hybrid working becomes the norm.”
About CoStar
CoStar Group, Inc. (NASDAQ: CSGP) is the leading provider of commercial real estate information, analytics and online marketplaces. Founded in 1987, CoStar conducts expansive, ongoing research to produce and maintain the largest and most comprehensive database of commercial real estate information. Our suite of online services enables clients to analyse, interpret and gain unmatched insight on commercial property values, market conditions and current availabilities. Headquartered in Washington, DC, CoStar Group maintains offices throughout the U.S. and in Europe, Canada and Asia with a staff of over 5,000 worldwide, including the industry’s largest professional research organisation. For more information, visit www.costar.co.uk.
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