Central London Office Availability up 51% to Highest Level in More Than 15 Years

Rhea-AI Summary

CoStar Group reports a 51% increase in office availability in central London since the end of 2019, now reaching 31 million square feet. This figure surpasses the peak of 28 million square feet post-2009 financial crisis. The rise in available space stems from the pandemic's impact, leading to decreased leasing and increased subleases. However, leasing activity is stabilizing, with a 'flight to quality' trend indicating ongoing demand for high-quality offices. CoStar emphasizes that demand for lower-grade buildings has significantly dropped, while premium spaces remain favored.

Positive

• Office availability increase of 51% since 2019 indicates potential market recovery.
• Rising take-up and stabilizing void periods suggest stabilization in leasing activity.
• Ongoing 'flight to quality' trend supports sustained demand and potentially higher rents for premium office spaces.

Negative

• Overall office space availability remains high despite a leveling off in 2022.
• Significant drop in demand for lower-quality office buildings (1 to 4 Star), potentially limiting market recovery.

LONDON--(BUSINESS WIRE)-- Office availability in central London has risen by 51% since the end of 2019 to stand at its highest level in more than 15 years, according to CoStar Group, a leading provider of online real estate marketplaces, information and analytics in the property markets.

The 31 million square feet available as of August 2022 is up from a figure of circa 20 million square feet as the pandemic struck. It is also three million square feet above the peak of 28 million square feet reached in the aftermath of the financial crisis in mid-2009.

The pandemic and enforced pivot to home working led to a sharp drop in leasing plus a big rise in sublease availability in the early part of the crisis as firms sought to offload unused space. While this sublease trend has since subsided, as tenants have either taken back space or let leases expire, overall availability remains stubbornly high amid an ongoing pivot to hybrid working, sublease space being returned to landlords and new buildings beginning construction.

However, the market may be turning a corner, comments Mark Stansfield, senior director of UK market analytics at CoStar. “The availability increases recorded during 2020 and 2021 have levelled off this year which, together with other positive indicators such as rising take-up and stabilising void periods, suggest that the bulk of the pain is behind us.”

The growing ‘flight to quality’ trend should also support demand and rents in better-quality buildings.

Stansfield added: “It’s worth noting that while office space released onto the market significantly outweighed new leasing during the pandemic, CoStar data shows that all of the demand losses came in poorer-quality, 1 to 4 Star buildings (Grade B to C), with demand remaining positive in the best quality, 5 Star buildings throughout. Firms will likely continue to seek high-quality space to retain staff, welcome clients and meet growing ESG commitments, even if many take less space overall as hybrid working becomes the norm.”

About CoStar
CoStar Group, Inc. (NASDAQ: CSGP) is the leading provider of commercial real estate information, analytics and online marketplaces. Founded in 1987, CoStar conducts expansive, ongoing research to produce and maintain the largest and most comprehensive database of commercial real estate information. Our suite of online services enables clients to analyse, interpret and gain unmatched insight on commercial property values, market conditions and current availabilities. Headquartered in Washington, DC, CoStar Group maintains offices throughout the U.S. and in Europe, Canada and Asia with a staff of over 5,000 worldwide, including the industry’s largest professional research organisation. For more information, visit www.costar.co.uk.

View source version on businesswire.com: https://www.businesswire.com/news/home/20220824005191/en/

News Media

Matthew Blocher

CoStar Group

(202) 346-6775

mblocher@costargroup.com

Source: CoStar Group, Inc.

FAQ

What is the current office availability in central London according to CoStar Group as of August 2022?

As of August 2022, office availability in central London stands at 31 million square feet.

How much has office availability increased since the end of 2019?

Office availability in central London has risen by 51% since the end of 2019.

What does CoStar Group indicate about the leasing activity in 2022?

CoStar Group indicates that leasing activity is stabilizing with rising take-up and void periods.

What trend is affecting high-quality office spaces according to CoStar's report?

There is a 'flight to quality' trend where firms are prioritizing high-quality office spaces.

What has happened to the demand for lower-quality office buildings during the pandemic?

The demand for lower-quality office buildings (1 to 4 Star) has significantly decreased during the pandemic.