London’s grim central office market could take a turn: property company

London’s city center office market may have just bottomed out.

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London’s city center office market may have just bottomed out.

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The latest report from commercial real estate firm CBRE paints a gloomy picture of the central area and its offices, but that does not reflect a recent increase in activity, said Ted Overbaugh, senior vice president of CBRE.

“It’s no secret that the core has been struggling, it’s been hit hard, but I think for the first time in a few years it could be turning a corner,” Overbaugh said. “We’re starting to see signs of life, some activity.”

Over the past four weeks, CBRE has had about four clients looking to lease space in the center and each has seen three or four spaces, said Greg Harris, associate vice president and broker at CBRE.

“I know it doesn’t look like much, but you have to realize we weren’t showing anything downtown,” he said.

Harris said he also knows that competitors’ customers have started looking downtown with the possibility of renting large spaces.

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“We have seen an increase in interest and activity, including visits to downtown office spaces. There is an increase. I expect to see deals in the next quarter or two quarters,” he said.

The 2022 CBRE Market Outlook Report shows that the vacancy rate for basic office space stands at 28%, a spike of nearly 10 percentage points from 18.5% in 2020.

Strangely, the asking price for the space actually increased from $14.06 per square foot to $14.25. There was literally no “absorption” or new leased space and no new space was added, with inventory remaining steady at 4.7 million square feet.

“Big companies, corporate players, are starting to put people back to work. The worst may be behind us. We’re starting to see commercial activity,” Overbaugh said.

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“I think everyone wants to get back to normal. They have done a good job over the past few years and want to see some offices reopen. »

The recent report also shows stability in suburban commercial and office real estate, with numbers largely unchanged across the city, but greater demand in popular areas north and west of the city, although little space is available there, Overbaugh said.

“The suburbs are resilient. They are not as affected,” he said. “When vacancies in the city center appeared, the suburbs remained active. We haven’t seen that many businesses close.

In the suburbs, the vacancy rate was just 6.4%, about where it was in 2020, but there’s only 1.6 million square feet of space to rent.

Unlike downtown, the price of suburban space fell to $14.35 per square foot from $16.60 in 2020. No new space was added to the suburban market.

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In the industrial sector, CBRE reported the same lack of space that has plagued the market since the pandemic began, Overbaugh said.

“We need new developments. There is an extreme shortfall in supply which is far from (meeting) demand,” he said.

The vacancy rate is 0.6%, down from 2.1% in 2020, for the city’s 40.7 million square feet. The rent went from $6.17 to $9.05 in 2020.

Overbaugh said industrial properties on the market are being treated like residential real estate, with multiple bids and bidding wars with bids above the asking price.

“It’s a whole new world,” he said.

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Jose C. Birney