Brexit caution impacts central London office market
This article was originally published on Ready for Brexit.
The EU referendum in 2016 led to a significant slowdown in office leasing across central London and major cities around the UK. The market then rebounded in 2017-2019. However, DeVono Cresa data shows that the average size of office space leased in 2019 was down 15% at 9,338 sq ft versus the long-term average of 11,040 sq ft .
All the major business sectors saw shift downwards in the size of space taken. Legal, Professional and Corporate saw the largest drop with deal sizes down by around a third versus the long-term average. And as the chart shows, even the core sectors of Technology, Media & Telecoms (TMT) and Financial & Insurance (F&I) firms, which collectively account for half of all the leasing volume in London, saw an 11% and 4% decline respectively.
Brexit is of course only one factor influencing decisions on space planning, with others including the steady increase in the use of technology, the need for more agile working, and an increasing focus on staff well-being. But in another sign of economic and political uncertainty, DeVono Cresa has seen greater interest in short-term and more flexible leasing.
Developments in the market mean that businesses can now quickly access fully-serviced offices. Many managers see this as a way to mitigate short-term uncertainty whilst also gaining better facilities – with design-led spaces, additional meeting rooms and communal areas for collaboration all available. Perks such as on-site gyms and organised wellness programmes are often included, in addition to easy networking for specialist skill sets and outsourced site management. There is also a growing interest in searches for both leasehold and serviced or managed offices. All sizes of businesses, from all sectors, are participating in this trend, which grew by an astonishing 35% in 2019.
This analysis highlights how Brexit is occurring at a time when the traditional office leasing market is already going through a number of important paradigm shifts. As a result, Devono Cresa believes it makes more sense than ever to engage a trusted real estate partner to ensure that the search and selection process delivers the best space for the business – whether this is a move to smaller space, a different type of lease or even a different location.
Dan Robinson, Director of Global Portfolio Solutions adds that he has also seen a shift in priorities from overseas businesses:
“Clients on the other side of the English Channel – in manufacturing, logistics, and the wider supply chains – are increasingly anxious about the potential impact of Brexit on their business.
“Their property portfolio is just one factor in this, with concerns focusing on the potential challenges of coping with a new border, whether this is delineated technologically or otherwise. They are closely monitoring the situation whilst considering (and implementing) strategies focused on increased operational efficiencies and defending market share under any potential Brexit outcome. ”