Recently released statistics indicate that following the fall-out from the UK’s decision to leave the EU (Brexit), demand for Central London office space is now picking back up. Richard Carr comments.
Central London is the beating heart of the UK economy. Many global firms have their European headquarters in Central London. This allows global companies to benefit from the UK’s advantageous business laws and taxes, while providing easy access to the EU’s +500m-strong single market.
Experts worried that Brexit would damage Central London’s commercial real estate market, believing that global firms may flee to continental cities like Frankfurt and Paris. These fears were compounded by Prime Minister Theresa May’s announcement that the UK will opt for ‘hard Brexit,’ prioritising sovereignty over the single market. Did this spark an exodus of global firms from Central London?
Foreign investors are crucial to London’s commercial real estate sector and eviednce shows that they have not deserted the market. Data from Savills shows that over the past three months, these investors comprised 78% of commercial property bought in Central London. Savills found that price reductions, sparked by the dropping post-Brexit Pound, incentivised overseas investors to enter this market.
Meanwhile according to Property Wire, demand for Central London office space is now picking back up again. Figures released by Cushman & Wakefield indicate that in July, total occupational office space under offer dropped to a low of 1.7m square feet. In September, this rose by 47% to reach 2.4m, virtually matching the volume of Central London occupational office space under offer in June, just before Brexit.
The report also found that the number of occupiers committing to new office space in Central London increased during September 2016. Furthermore, 6.7m square feet of office space was taken up in the first three quarters of 2016, with Q3 improving on Q2 volumes of 1.6m. Cushman & Wakefield believes that the total for 2016 will be 8.5m, lower than 2013, 2014 and 2015, but higher than 2011 and 2012.
Commenting Cushman & Wakefield’s West End Office Head, Andy Tyler, said: “The leasing market slowed down sharply immediately post-Brexit but, as the latest data reveals, confidence is returning albeit at a rather muted level. We are seeing new enquiries coming in and occupiers are not afraid to commit.”
Going on, Tyler elaborated: “It is also worth noting the recent Business Rates increases could temper the competitive advantage which some locations have hitherto enjoyed and might play more to the West End and western fringe in future… Crucially, of course, what London seeks is clarity around what Brexit will look like and its impact. Only then will it be possible to fully assess the implications for the London office market. In this respect, 2017 could be a pivotal year.”
Cushman & Wakefield City Office Head, Alistair Brown, added that London’s occupiers are moving forward post-Brexit, realising that life and business goes on. Weighing in, he noted: “The City saw a 16% increase in office space going under offer during September, building on the momentum created over the summer by occupiers such as Wells Fargo who committed to 230,000 square feet at 33 Central.”
With Cushman & Wakefield’s report, we have further evidence that concerns over Brexit’s impact on London’s global status appear to be unfounded. Central London is a long-standing business hub, featuring world-class infrastructure and professional talent. Along with a favourable British regulatory environment, this makes Central London office space extremely attractive to firms all over the world.