The London office market is a pretty straightforward supply and demand equation. So with Brexit concerns about some businesses looking to quit the capital or at least downsize their offices, it was good to hear from the latest survey last week that overall construction levels have dipped slightly.
The supply tap has been partially turned off, and the overall office vacancy rate in Central London is currently 5.8% which is largely in line with the long-term trend and not yet close to the double-digit rates of past property slumps.
The news got better a few days after the survey came out when Land Securities’ CEO, Rob Noel, reported that the spectre of a Brexit had not impacted the London office market as badly as had been feared. With refreshing candour, the boss of the UK’s biggest property company reported that he was expecting rents to weaken faster than they have done.
Given a backdrop of some banks and finance houses talking about quitting London – JP Morgan’s decision to buy an office building in Dublin was widely covered in the press – it’s interesting to reflect that the City office market is already less reliant on finance sector occupiers.
Research from Colliers International shows that the number of City jobs provided by the financial sector has been falling as an overall proportion since the credit crisis. Financial businesses now generate less than half of the jobs in the City and that is forecast to fall to under a third by 2021. The growth sectors are now media, tech, professional services and ‘knowledge-based’ businesses.
As Rob Noel said last week, Brexit is taking the capital’s property market into ‘uncharted territory’ but so far the journey has proved less hazardous than expected.