London Office Tenants On Subletting Spree As Staff Telecommute
LONDON – Office space lessees in London are downsizing their office premises at a faster rate than what was seen during the 2008 Global Financial Crisis, reported Bloomberg, citing a recent study by CoStar Group.
In fact, over one million sq ft of office space in the UK’s capital was put up on the subrental market since June 2020. That massive amount translates to two Gherkin towers, according to the group, which provide data and analytics regarding commercial property.
The silver lining is that the worrying trend is confined to London, where the amount of second-hand office space surged by 21 percent over the period compared to a one percent uptick for the rest of the office markets across the UK.
Major financial institutions such as HSBC, Nomura, and Credit Suisse are among the office space tenants presently trying to sublet office premises they no longer require, as many employees prefer working from home amidst the COVID-19 outbreak.
CoStar’s head of UK analytics, Mark Stansfield, noted that lots of companies are relooking their office space requirements due to “the success of home working, coupled with ongoing concerns around public transport and coronavirus infections.”
“Some of this impact is now being seen in the data,” he added in a research note provided to CoStar’s customers.
For instance, statistics compiled by government agency Transport for London revealed that the number of people riding on trains in the capital is just about 33 percent of 2019’s figures even after schools were reopened.
In addition, the current rebound in COVID-19 infections in the UK and the significant increase in second-hand office premises could impact the country’s commercial property market, particularly the primary office space segment.
This is because existing tenants could be enticed to move from new buildings to more affordable but older office space. Although there’s a relatively tight supply of newly built vacant offices in London, the total vacancy rate is rising as lessors ditch unneeded office space.
