As the first signs of spring are beginning to show, so are the first signs of the UK workforce being able to leave the enforced hibernation of lockdown working.
The last 12 months have created the biggest change in living memory for London and we are only at the beginning of the journey. The panic that pervaded this time last year on the failure of urbanisation and the death of the office has disappeared, with more voices now coming out in support of living and working in our city centres.
Investors, tenants and developers alike are realising that in order to attract people back to the office they need to provide the best in class space. Firms want offices that will give their workers everything they missed out on while working from home. This will mean that we will see new office developments coming forward with a focus on placemaking – creating spaces for people to both work and spend their “thinking” time.
One of the challenges ahead will be what investors will do with existing stock that doesn’t reach the “expected” ESG standards. For buildings that are only 30 - 40 years old, redevelopment would in theory be the plan, but is such demolition now warranted in terms of sustainability, both environmentally or economically? Will we see such “redundant” buildings sitting empty until repurposed for other uses such as residential, leisure or grocery? The role of architecture will be key here. This is a trend that has happened before; the transformation of the warehouses of Farringdon into or “white collar” offices; more 80s office developments into residential and hotels; even historically the streets of Mayfair shifted from high class residential to high quality offices.
For investment stock, the London market is starting to function well for lot sizes less than £50 million with sales still happening. Indeed year-on-year the numbers are only 20 per cent down. But for larger lot sizes, the market is down 64 per cent year-on-year, and whilst there is verbal demand for London’s offices, particularly from overseas investors, the inability to travel is the biggest barrier to activity.
However this will change. Last year in the few months that travel permitted we saw circa £10 billion invested into London offices and it wouldn’t surprise me if, once business travel is underway again, we see investment turnover doubling from 2020 volumes to reach £20 billion by the end of the year.
About the Author
Andrew Thomas, head of International Capital Markets at Colliers, is responsible for international capital moving towards London and the rest of the UK and Europe. He advises a number of investors on sales, acquisitions, asset management and development funding. Andrew is an established member of the London Market and has 26 years of experience. To get in touch, contact Andrew.Thomas@colliers.com.