While market conditions remain exceptionally challenging, latest numbers coming out of the Central London office market suggest that typical measures of distress are not anywhere near danger levels at present.
Key positives include:
- Vacancy is still below average. Many occupiers will retain space to accommodate offices redesign strategies.
- Grey space will be key driver of vacancy rises throughout 2020, but is still currently below trend.
- Supply of ‘new’ space will stutter, meaning the delivery of spec product will be even more constrained / delayed.
- Healthy amounts of space are still under offer, albeit with COVID-19 clauses, which assuming steady improvement in lockdown easing, won’t be exercised.
- While headline rents are holding firm, we expect downward pressure in 2020 as grey space grows and occupiers revise requirements but...
- ...2021 looks more encouraging with a potential back-loaded bounce in rental growth, as new grade A vacancy falls to a record low.
- Crossrail delivery will be key to allowing fast, efficient access to core locations.