Market Trends of United Kingdom Office Real Estate Industry
This section covers the major market trends shaping the UK Office Real Estate Market according to our research experts:
Declining Vacancy Rates and Increasing Rents of Office Spaces in London
The Greater London and South East office market experienced a resurgence in demand in 2021, following the lower take-up recorded in 2020 as a result of lockdowns.Take-up reached 3.5 million sq ft, which reflected a 46% and 12% increase in the take-up recorded in 2020 and 2019, respectively. The transactional activity was only 2% below pre-COVID-19 levels, illustrating the healthy levels of occupier activity in the market. The Western Sector was the most active geographical region in 2021, accounting for 45% of total take-up.
Several large companies deciding to stay in the area for the long term gave the market a boost of confidence. This included Unilever, ITV, and Intercontinental Hotels Group, which all leased over 50,000 square feet in 2021. There were ten deals recorded over 50,000 sq ft, which was the highest total since 2018 and the second highest quantum in the last five years. Notable transactions in Q4 2021 included Skanska leasing 67,000 sq ft at Leavesden Park, Watford.
Decrease in office real estate investment volume in the United Kingdom
Office real estate used to make up most of the commercial property investment market in the UK, but since the coronavirus (COVID-19) pandemic started, investors have been more interested in industrial real estate. With the eCommerce sector growing and supply chain management becoming more important than ever, so has the industrial and logistics sector. This rise in importance is also seen in the occupier market, where the number of new tenants has been higher than the 10-year average for the past three years in a row.
In the UK, the number of commercial real estate investments has changed over the past few years. Because of the coronavirus (COVID-19) crisis, investment activity slowed down a lot in the second quarter of 2020. This was true for all three major sectors: office, industrial, and retail. 2020 ended with a strong fourth quarter, indicating early signs of recovery, but fell again in the first three months of 2021. Office, which has traditionally been the most attractive sector for investors, saw GBP 2.12 billion (USD 2.53) in real estate investments, more than one billion less than industrial.