Signs of life: London offices still hot-property for major corporationsAndrew Smith
Much of the UK property industry has been struggling to cope with tighter local restrictions announced by the government this month. However, despite Tier-2 alert status taking hold in the UK capital, an exception to the general downturn in new lettings and acquisitions has emerged in the London office market, which is showing signs of life. A number of large companies including Netflix, Morgan & Stanley and Google have recently undertaken significant office moves into the capital’s biggest and best buildings. This week, we also saw John Lewis gain permission to convert the upper floors of its iconic West End flagship store into new office space, all of which seems counterintuitive given the popular prediction that white-collar workers will not return to working from the office five days a week, even once the pandemic is over.
Big companies are showing a return of confidence in the role of the workplace and investors are taking note. KKR & Co recently bought a stake in London office developer Great Portland estates PLC, while Brookfield Asset Management built up its stake in British Land Co., owner of some of Britain’s best office buildings, in September.
Bloomberg posits that the recent spike in activity could perhaps be explained by the scarcity of large modern office space in London. It’s often easy to forget the time before Covid-19 given its utter dominance in 2020, but there was caution among new developers to progress speculative projects pre-Covid due to Brexit uncertainty, which could be forcing large companies to make moves to secure space now despite not knowing what working culture will look like several months down the line. However, what we are seeing among large companies in terms of working culture, is a general agreement that the role of the office is still important, not so much in terms of physical space, but in its ability to foster a sense of community.
Google CEO Sundar Pichair spoke of focussing in a “hybrid” working model that would include both office and remote working: “We firmly believe that in-person, being together, having that sense of community is upper important for whenever you have to solve hard problems, you have to create something new”. This is a viewpoint that we at Innesco share, with the team now returning to the office one day a week. We have been as pleased to once again support the local businesses surrounding our office on Lamb’s Conduit Street, as we have been to catch up with our colleagues in person more regularly.
It will be fascinating, if a tad daunting, to see what the future holds for the office market globally – and what repercussions there will be for the wider property sector. In today’s increasingly nervous economic, political and social environment, decisions about office location are becoming more, rather than less, important. It appears the well-designed and well-located buildings of central London still hold significant appeal for the cream of the corporate crop. As for everyone else, the unknowns are abundant. Who will work from home? Who will require actual office space? How will they be configured and precisely where should they be located? These are significant questions that will be weighing heavily on the minds of CEOs in the current climate, and will require some serious strategic thinking, new data and planning to resolve.