London continues to battle the COVID headwinds, and although rental volatility has stayed firmly off the agenda throughout 2020, we anticipate inevitable downward pressure in the first half of 2021. Take-up has clearly suffered, but should recover in 2021 as occupiers who have put decisions on hold should reactivate. In our December update, we also note -
- Vacancy on the rise. Marketed availability has risen sharply in 2020. West End vacancy started the year at 4.0%, but has now risen to 6.8% - its highest level since 2010.
- New Grade A shortage maintained. New Grade A availability continues to fall. Despite some modest delivery of spec space, we envisage acute supply constraints throughout 2021 and into 2022.
- Tenant marketed space at 8-year high. The sluggish nature of deals activity, occupier distress and concern over future working practices are leading to a log jam of secondary supply. Sublet availability is up by 75% in the year-to date.
- Any way the wind blows? As with all downturns, however long or short, some occupiers will test the water to see if there Is demand for any of their excess space. Regardless, it is likely that many corporates will move towards a reduction in occupational density during 2021.
- Pent-Up Demand. While take-up in H2 2020 will be at least 50% below trend, there is every reason to expect a surge demand as 2021 progresses, relative to current levels.
