2018 beckons a further shift in the property market. With Brexit negotiations casting an ominous shadow over economic growth, investors are becoming increasingly cautious over rental prospects. However, the ripple effect extends further than exchange rate and inflation.
The close of last year witnessed an increase of interest rates by the Bank of England for the first time in ten years. This, however, has not given sway to the uncertainty which remains the dominant feeling within the current UK commercial property market. Investors are still assessing the impact of leaving the EU on their business plans, driving them to make clever property decisions.
2018 has already seen overall vacancy rise to 12.2 million sq ft from 8.5 million at the start of 2017. Notably, the pace of available property has slowed significantly over the past few months. However, it should not be assumed that risk aversion amongst investors has impacted vacancy, rather there are different office qualities being sought.
The rise in vacancy across London has impacted the price of rent which brings 2018 as the prime time to invest in a new space. There has been a marginal decrease in London’s grade A and B City prices, which has resulted in some of the best locations becoming more accessible and affordable.
|Borough||Grade A Rent||Grade B Rent|
|Knightsbridge||£80 - £95||£60 - £75|
|Hammersmith||£50 - £60||£35 - £45|
|Chiswick||£45 - £55||£35 - £45|
|St. James||£110 - £120||£70 - £90|
|Victoria||£65 - £75||£47.50 - £63.50|
|Mayfair||£110 - £120||£65 - £75|
|Paddington||£70 - £75||£55 - £65|
|Midtown West||£60 - £80||£45 - £55|
|Soho||£80 - £95||£55 - £65|
|North Oxford St East||£80 - £90||£60 - £65|
|North Oxford St West||£75 - £90||£60 - £75|
|Kings Cross||£75 - £82.50||£50 - £72.50|
|Southbank||£65 - £75||£55 - £65|
|City||£55 - £70||£40 - £50|
|Stratford||£40 - £50||£30 - £45|
|Canary Wharf||£40 - £50||£35 - £40|
|Midtown East||£62.50 - £70||£45 - £57.50|
|Euston||£67.50 - £72.50||£55 - £65|
Average 2018 Office Rental Costs based on Grade A newly refurbished space & Grade B space
(£ High - £ Low per sq ft per annum)
With Brexit inciting equivocal change in business, occupiers are seeking new ways of protecting themselves against any outcome of the negotiations through flexible workplaces. Last year, WeWork led the expansion of the flexible office sector, which accounted for 20% of the annual take-up. As we move forward, the best offices will need to be both accessible and affordable, able to provide tenants with cheaper rent and design features that are future-based. Margin-enhancing AI tools are steadily becoming a desirable feature in the workplace, improving cost efficiency without replacing staff roles.
There is risk in becoming too complacent with the rise in vacancy, as experts are predicting a shortage of new offices throughout London over the next three years. Last year, there was a particularly high demand for new space within technology and media industries so much so that there was a threat of a supply shortage. Now there is speculation that nearly a quarter of the 72 commercial developments in progress will not be completed until 2020.
With this in mind, it is evident that now is the time to act on finding your new office space, as the take-up for 2018 is forecast to be higher than ever. There will be an increase in demand for coworking spaces as offices become more focused on wellbeing and the open plan layout. Finance and insurance firms are at the forefront for office take-up and businesses across London are set to lease more than 5 million sq ft in the year ahead.
You can download the full London Office Rental Guide here
Here you’ll find top tips on office interior design, office relocation advice, commercial refurbishment ideas and our insights into workspace efficiency and its impact on workplace productivity, as well as guidance on virtually anything to do with a happy, efficient working environment.