LONDON OFFICE MARKET REVIEW - Knight Frank
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
LONDON OFFICE
MARKET REVIEW
Faisal Durrani
Head of London Commercial Research
16 September, 2020
THE (SCARY) BIG PICTURE
-22.1% 60.3 649k -30%
H1 GDP growth UK August Composite Jobs lost between WTO forecast for decline in
(ONS) Markit/CIPS PMI March and June UK trading volumes in 2020
(Manufacturing: 50.1 to 61.6
Services: 47 to 60.1)
MARKET CONTEXT
LEASING INVESTMENT
3.3m sq ft £3.4bn
LTA LTA
1.26m sq ft £595m
Q2 2020 Q2 2020
Source: Knight Frank
LONDON OFFICE INVESTMENT REBOUNDS
£3.4bn £231m
£961m
July 2020
LTA April 2020
£166m
£52m June 2020
May 2020
5 deals 2 deals 10 deals 12 deals
£595m
Q2 2020
Source: Knight Frank
PRIME GLOBAL OFFICE YIELDS - Q2 2020
%
5.00
4.50
4.00
3.50
3.00
2.50
2.00
1.50
1.00
0.50
0.00
Beijing*
Berlin
Paris
Shanghai
Tokyo*
Munich
London (West End)
London Docklands
New York (Manhattan)
London (City)
Hong Kong*
Source: Knight Frank
*indicates gross yield
MARKET CONTEXT
• Prime rents stable: £115 per sq ft in the West End; £72.50 per sq ft in the City
• No rent chips in any market yet; although incentives are drifting
• Demand has weakened as businesses pause relocation and expansion decisions
• Concerns remain:
• Global economic growth;
• The end of the government’s paid-furlough scheme;
• The spectre of a no-deal Brexit;
• The volume of space released by businesses: so far c.1.4m sq ft formally released
VACANCY RATE CALCULATOR
TENANT RELEASE SPACE SCENARIOS
Vacancy Rate
REFERENCE DATA Amount of space released
From To Difference LTA
Q2 2020 availability: 14.6m sq ft 2.5% 3.4m sq ft 6.1% 7.7% +1.6% 7.8%
Total stock: 233m sq ft
5% 6.7m sq ft 6.1% 9.1% +3.1% 7.8%
GFC vacancy peak: 10.9%
10% 13.5m sq ft 6.1% 12.0% +5.9% 7.8%
DotCom bubble vacancy peak: 13%
15% 20.2m sq ft 6.1% 14.9% +8.8% 7.8%
Brexit-vote vacancy peak: 6.9%
20-year vacancy rate average:
7.8%
Source: Knight Frank
*relative to total London stock as at Q2 2020
WHERE DOES THAT LEAVE COWORKING? • We need offices! • Serviced offices to the rescue? • Trends from Asia • Demand in commuter towns and villages?
SUPERCHARGED LONDON OFFICE TRENDS
SUPERCHARGED FUTURE TRENDS
1 PUTTING CUSTOMERS FIRST
Partnerships are paramount
Excellent customer service
Amenity rich spaces
World-class experiences
Maybe even good views!SUPERCHARGED FUTURE TRENDS
2 ESG CONSIDERATIONS
Why bother?
Legislation
People matter
Investors care
Obsolescence?
Is London ready?SUPERCHARGED FUTURE TRENDS
3 CONNECTIVITY MATTERS
FTTP is difficult, but important
Digital wellbeing – really?
King’s
Cross
Digital rental premiums
Southbank
Richmond
Obsolescence?
KentTRACK RECORD
Source: Knight FrankCURRENT SALES
Source: Knight FrankIMPORTANT NOTICE This general document is provided strictly on the basis that you cannot rely on its contents and Knight Frank LLP (and our affiliates, members and employees) will have no responsibility or liability whatsoever in relation to the accuracy, reliability, currency, completeness or otherwise of its contents or as to any assumption made or as to any errors or for any loss or damage resulting from any use of or reference to the contents. You must take specific independent advice in each case. It is for general outline interest only and will contain selective information. It does not purport to be definitive or complete. Its contents will not necessarily be within the knowledge or represent the opinion of Knight Frank LLP. Knight Frank LLP is a property consultant regulated by the Royal Institution of Chartered Surveyors and only provides services relating to real estate, not financial services. It was prepared in June 2020. It uses certain data available then, and reflects views of market sentiment at that time. Details or anticipated details may be provisional or have been estimated or otherwise provided by others without verification and may not be up to date when you read them. Computer-generated and other sample images or plans may only be broadly indicative and their subject matter may change. Images and photographs may show only certain parts of any property as they appeared at the time they were taken or as they were projected. Any forecasts or projections of future performance are inherently uncertain and liable to different outcomes or changes caused by circumstances whether of a political, economic, social or property market nature. Prices indicated in any currencies are usually based on a local figure provided to us and/or on a rate of exchange quoted on a selected date and may be rounded up or down. Any price indicated cannot be relied upon because the source or any relevant rate of exchange may not be accurate or up to date. VAT and other taxes may be payable in addition to any price in respect of any property according to the law applicable. © Knight Frank LLP 2020. All rights reserved. No part of this presentation may be copied, disclosed or transmitted in any form or by any means, electronic or otherwise, without prior written permission from Knight Frank LLP for the specific form and content within which it appears. Each of the provisions set out in this notice shall only apply to the extent that any applicable laws permit. Knight Frank LLP is a limited liability partnership registered in England with registered number OC305934 and trades as Knight Frank. Our registered office is 55 Baker Street, London W1U 8AN, where you may look at a list of members’ names. Any person described as a partner is a member, consultant or employee of Knight Frank LLP, not a partner in a partnership.
Important Notice The views expressed by external parties such as Knight Frank and or its related parties, directors, employees and agents (“Knight Frank”) at any time during this presentation may not be, and should not be, taken to be the same as those of UBS AG, its related entities, directors, employees and agents (collectively, “UBS”). UBS does not attest to the accuracy and/or completeness of any information and associated materials provided to you by Knight Frank. Opinions expressed by Knight Frank do not represent the opinions of UBS. UBS is independent of Knight Frank and makes no recommendation in relation to Knight Frank and/or its services. You should arrive at your own assessment of any views expressed by Knight Frank and contact Knight Frank directly should you be interested in its services. (c) UBS 2020. All rights reserved. UBS AG London branch, 5 Broadgate, London EC2M 2QS
LONDON OFFICE
MARKET REVIEW
Faisal Durrani
Head of London Commercial Research
16 September, 2020You can also read
