Carter Jonas reported last week that the high demand and low supply of new and refitted Grade A office space in London is increasing rents and resulting in landlord-friendly leases.
Although there are high construction levels and the report highlights an increasing development pipeline, many office buildings under construction are substantially pre-let. For instance, the 62-storey 22 Bishopsgate is already around 30% pre-let and 27% under-offer.
The second-hand refurbished office market offers tenants more choice and lower rents. However, as Carter Jonas notes, tenants increasingly recognise that high quality offices with built-in wellness features have a positive impact on recruitment, staff retention and productivity, which again shifts the demand towards new builds.
One example of this trend is the Finsbury Tower / HYLO redevelopment by CIT. The project has a specific focus on wellness, with green spaces on four floors, together with specialist lighting and air filtration systems. We explore the evolving requirements of occupiers in further detail in this previous blog.
Carter Jonas also discusses how, despite Brexit, London has remained a hub for international businesses, especially in the technology sector. Nevertheless, there is a concern in the market about the impact of a restrictive immigration policy post-Brexit.
The key issues for London office occupiers are undersupply in the new and refitted Grade A office market, declining choice and increasing upward pressure on rents.