The huge rush of positivity and optimism towards business in the South East seen at the start of the year has waned slightly as we prepare to enter Q3.
The war in Ukraine, inflation, supply chain issues and the cost of living crisis has slowed office leasing and purchase activity a little of late, usually a useful marker as to how confident British business is feeling as a whole.
That's according to Reading-headquartered commercial property consultants Lambert Smith Hampton, who have just released their Thames Valley & South East Office Report for 2022.
The leading UK commercial and residential real estate consultancy and agency are showing that there's a slightly slowing in contracts being signed, but it's nothing to worry about. It looks likely that the market will stay steady and figures remain largely in line with the quarterly average.
Current office space availability stands at roughly 15 million sq. ft., which has been steady since the end of 2020. For context, that's 32% below its peak from 2009.
Other factors such as the scaling back of the time we spend in the office post-pandemic and the type of space now required due to hybrid working is presenting both occupiers and landlords with a plethora of new risks and opportunities.
Charlie Lake is the Capital Markets Director at Lambert Smith Hampton. He says this about the findings in the report: “While pricing for the very best assets appears resilient, secondary assets appear increasingly exposed. A recent surge in SWAP rates has significantly driven up the cost of debt for prospective buyers, in the process driving increased apathy towards pricing of secondary assets, particularly out of town assets and / or those which do not benefit from strong underlying alternative use value”.
Ryan Dean, head of National Office Advisory at LSH, said: “With an increasing number of occupiers expected to exchange quantity for quality over the coming years, the general lack of speculative development in the south-east will translate into a real shortage of high-quality options, with a significant pinch-point emerging from 2024 and beyond in almost all markets”.