London Office Vacancy Hits Record High
UNITED KINGDOM – Initial statistics from CoStar showed that the office vacancy level in London has reached a record high during the third quarter, according to a report from The Financial Times last week.
CoStar said the office vacancy rate in the UK’s capital rose to 9 percent, the highest since the commercial property research company began recording this business data.
Savills’ Head of Central London Office Agency Jonathan Gardiner revealed that large firms held off on committing to office rental deals as they’re “still trying to understand their spatial needs,” as arrangements change from work from home during the pandemic to hybrid working and a higher mandated office attendance.
Gardiner noted that while tech firms and companies from the media industry have historically boosted the capital’s office space take up, these businesses are currently surrendering workspaces because of slower growth. Still, large office leases in London’s City and West End areas fuelled a 19 percent quarter-on-quarter growth in overall office rental activity across the United Kingdom.
Also, investment in London commercial properties remains significantly below its pre-pandemic levels and more than 20 percent lower on an annual basis so far this year. Nonetheless, it recovered slightly to £2 billion in Q3 2023 due to a series of deals driven by demand for modern and eco-friendly office buildings as well as newly renovated offices in central London that are in short supply.
“Big ticket transactions [are] really not happening at the moment,” added CoStar’s Director of UK analytics Mark Stansfield. “There is still a divide of expectations between sellers and buyers.”
This comes as major firms like Amazon, JPMorgan, BlackRock, and Lloyds Banking Group implemented measures in the past few months that require their employees to be in the office on certain days.
Meanwhile, the office vacancy in San Francisco rose to its highest level in about 20 years when it reached about 20 percent in Q3 2023 from just 6.3 percent at the start of the pandemic. In New York, the office vacancy level climbed to 13.4 percent – the highest in almost two decades.