The lack of commercial building activity in London – new build or refurbishment – during and after the recession has kept availability at a much lower level than was the norm prior to the credit crunch in 2008.
The risk of office regeneration during an economic downturn
This is easily explained: regenerating a building meant the landlord taking a huge risk. Firstly they would have to empty the building, immediately depriving them of rental income. Then they would have to invest capital in refurbishing or rebuilding the property. And when it was finally ready for occupation again, there was no guarantee that it would re-let in such uncertain economic times. The landlord may find themselves offering a massive rent-free period just to persuade a new tenant to sign a lease. All in all a huge financial risk, which prompted many building owners to prefer their existing tenants to stay put. A much safer bet in the circumstances.
Increased activity lags behind renewed demand
Of course with economic recovery, confidence is returning and buildings are now being regenerated (even if sometimes only partially). However the effect of regeneration are not immediate; there is a time lag between increased regeneration and increased availability – many months at a minimum. And of course it will take time for regneration activity to gather pace. New projects get the go ahead everyday, but that isn’t quick enough to keep pace with renewed demand.
Finding an office has become more challenging
During the recovery, demand for space in London has soared, especially in the West End, and vacancy rates have fallen dramatically. When our clients needed new space this time last year, we would usually find 10 offices that were potentially suitable. Now , however the situation is much more challenging: the number of office space options are greatly reduced and the majority of those options are usually very fresh.
London office rents will rise as demand outstrips supply
Yesterday I went to the launch of a new 40,000 ft2 development not far from Oxford Circus, where it was confirmed that the whole building is already under offer to a company (or possibly several companies) and that this had happened before the works were completed. The changing balance between supply and demand means that Central London office rents will surely rise. There are already clear signs of this happening.
Scarcity of options is more challenging than increased cost
However it is the scarcity of office space, more than the cost, that we believe will become the most challenging issue for growing companies. More often than not, the offices that we are able to find for our clients are options that are not yet on the market – and therefore not widely known to be available. Because we are in the market, we receive early information on space that will shortly become available.
But it’s not impossible: the Find a London Office Advantage
Early notifcation of soon-to-be available office space is increasingly valuable information if you are a company with a business plan and in need of new premises to put your plan into action as quickly as possible. Access to this information would enable you find suitable office space more quickly, stealing a march on your competitors and gaining a vital edge in your own market.
If that sounds like you – if you want access to this information – please tell us who you are and what you are looking for and we will do our best to help.