Demand for office space in London dropped ahead of the general election, but could start to pick up, research has found.
The London office space market experienced a 30% fall in the first quarter (Q1) of 2015, compared to Q4 2014, revealed analysis by Bilfinger GVA.
The report also explained that the West End market mirrored this trend, with take-up down 47% in Q1. This is the slowest period since Q2 2013.
Demand for Office Space in London Fell Ahead of Election
Bilfinger GVA predicts a resurgence in activity as businesses delayed buying ahead of the election, but are no longer insecure due to the Conservative majority.
Senior Director at Bilfinger GVA, Patrick O’Keeffe, comments: “Following what has undoubtedly been an unexpected yet welcome election result for London’s office market, we may be set to see some pent-up demand affecting the market, which has cooled in the recent weeks as occupiers and investors waited to see the results.
“This majority Government has presented much needed clarity. We would expect the nature of this result to now encourage businesses to commit to office space requirements.”1
Bilfinger GVA also suggests that the recent demand for residential properties in central London could be “drying up.” Many London offices have been converted into luxury homes; however, demand is surging for office space in parts such as Mayfair.
The report states: “Commercial office developers are relishing the chance to compete again on the same level and sometimes even outbid residential developers on the back of rental growth expectations.
“An example of this is the sale of 20-21 St. James’s Square, now rumoured to be under offer to Threadneedle, which was originally offered as a residential conversion, but was re-marketed as an office refurbishment opportunity following an unsuccessful sales process.
“While Westminster Council is attempting to crack down on the loss of office space in central London, the election result has also played a part in changing this, and has now presented clarity on the much debated mansion tax, rent controls and non-dom status.
“The positive impacts of the election are yet to be seen, however, there is no doubt that it has already made a mark upon the residential and commercial markets.”1