Having been commuting into the office in London five days a week since 29 March, I am pleased to say the vibrancy on the ground is improving week by week.
The capital is repopulating with workers in a steady and positive manner. Tuesday to Thursday are noticeably the busy days for commuting into the office, restaurants are being booked out and footfall in the West End retail district is rapidly increasing.
So what is happening on the ground in the office, retail and leisure markets?
The hot occupational sectors for offices are boutique finance/ private equity, legal and the fast-growth tech companies. While 26m sq ft of office space is available on the market, a figure not seen since 2003, there is competition for best-in-class offices that meet the demands of the progressive occupier.
CBRE has seen the highest number of enquiries for restaurant space for five years
Consequently, declines in prime rents have bottomed out and recovery is already happening in some markets, Mayfair and St James being examples.
At CBRE, of the 6.1m sq ft of London offices we have in lease negotiations, 80% is on new or newly refurbished space, supporting the trend of a flight to quality that we are seeing across the market.
Investors in the London office market are plentiful both for standing investments and for development sites, as investors take advantage of yield arbitrage between London and other global cities and look to deliver schemes into the next growth cycle.
There is around £40bn to £45bn of global capital seeking investments in London, with 76 global investors with mandates to invest in excess of £200m.
In the retail sector, footfall spiked once restrictions were lifted to 60% of levels seen in 2019 across the West End, according to data from the New West End Company, and the figure has now settled down to 55% of 2019 levels.
Inspections of retail units and general sentiment continue to improve, with strong interest in fitted restaurants due to strong consumer demand and a desire to limit upfront capital expenditure.
CBRE’s retail and leisure team has seen the highest number of enquiries for restaurant space for five years.
Towards the end of the past quarter, we also began to see confidence return in the retail investment market. Bond Street in particular has remained resilient and continues to be a key focus for investors, with two prime flagship buildings having traded in the past quarter.
While plans for the ending of Covid restrictions still hang in the balance, that easing cannot come soon enough for London businesses. The promise of reduced social distancing and a positive return-to-work stance from the government will provide London businesses and retail and leisure venues with the boost they need.
The opening up of the capital to tourists will also be a major step forward.
CBRE’s workplace team is seeing businesses embrace improved workplace environments to facilitate greater productivity, collaboration and learning, resulting in the de-densification of the occupancy of offices.
The loosening of working restrictions is incredibly important to London. Figures from the ONS/Oxford Economics show London’s international labour organisation unemployment rate was among the highest of any UK city, at 5.5%, and above the UK average of 4.5%.
Some might say this is a natural moment to pivot heavily towards the government’s regional levelling-up agenda. However, the reality is that without our global gateway city performing, the whole of the UK will suffer.
London delivers 24% of the UK’s total economic output, employs more than twice as many people as the seven next biggest UK cities combined and delivers investment across the country — all highly important contributors to the UK economy, without which everyone across the UK is disadvantaged.
We all need to play our part in reigniting the magic that makes London a global city of choice for talent, innovation, enjoyment and business excellence in clusters across all sectors. We all need to lean in and commit to London’s future success.
Richard Smart is managing director of London at CBRE