Since its last survey, the UK saw the sharpest contraction in economic activity in more than a century as a result of COVID-19. The easing of lockdown restrictions led to a surge in business activity over the summer months. However, the strong summer economic performance is now waning with the second lockdown, as well as the looming Brexit deadline at the end of the year.
Like many businesses we believe the London office real estate market is currently facing a ‘state of suspension’ as business occupiers pause to reflect on what the future of working will look like and how this might impact future workplace requirements.
- Completion of new office developments has been delayed as contractors work out how to build safely holding up planned moves.
- In the first lockdown developers were unable to market buildings as prospective tenants were unable to visit.
- Tenants facing lease expiries seek holding strategies before committing to new space.
- The UK government’s implementation of new, England-wide restrictions means that returning to the office has been delayed.
- There is much hope and anticipation that a vaccines programme will provide a way-out of the current situation.
- Developers and funders delay decisions on further speculative development until there is more clarity in the market, including occupier office strategies.
The homeworking experiment has given businesses potential options going forward but working out exactly what that might mean will take time. Faced with the impact of economic uncertainty, businesses have begun reviewing their real estate requirements; reflecting upon costs, required occupancy ratios, ability to deliver and sustain critical functions, ease of access and connectivity, as well as overall resilience.
In an effort to understand changes in office construction in central London, Deloitte's team of researchers have once again walked the streets across all the established and emerging submarkets, speaking to London’s developers to understand their construction plans going forward, as well as their current concerns around the market.