Navigating the property lifecycle 2022
Welcome to this year's edition of the M25 & South East Office Market Report.
Operational to end of life and reinvention. Identifying the factors that influence each stage can help us understand where the market is heading – and identify opportunities.
2 minutes to read
If we were to roll back the clock six months, consensus opinion probably would have cited 2022 as the year in which the imbalances wrought by the pandemic would begin to resolve.
Instead, geopolitical instability has reared and quickly replaced Covid-19 as the biggest risk to business confidence and global growth. In addition, UK inflation has risen to 7% – the highest it has been for 30 years. Seemingly, the stable foundation that businesses were hoping for in 2022 has been deferred for a little longer.
So, what of south east offices?
To understand the implications for the market, we have reconnected with the fundamental principles on which the real estate market is formulated. There is, of course, nothing more fundamental than the lifecycle of property. From concept and first occupant. Operational to end of life and reinvention. Identifying the factors that influence each stage can help us understand where the market is heading – and identify opportunities.
Foremost, the subject of viability has entered the market narrative with much greater vigour. The construction industry is feeling the impact of Covid, through supply chain disruption and price inflation. Climate responsibility is compounding the pressure on build costs prompting a reassessment of the future development pipeline.
This challenge to supply comes at a time when there is a greater onus on the quality of workplace. Office stock in many of the south east centres is now showing signs of obsolescence caused by age, future conformity and changing occupier preference. Vacancy rates for best quality are at critical lows in some centres meaning there is a case for selective new development.
But the requirement for “best” space is just part of the workspace evolution.
The pandemic has been a catalyst for people and companies to reassess working practices. In effect, it has been the biggest workplace experiment this century. Freedom to choose the optimum place where tasks can be performed is now integral to the employee/employer relationship. Consequently, understanding the quantum and type of office space required is now first order for organisations, however, “rightsizing” might not necessarily mean “resizing”. And this is particularly true of the innovation-led sectors. Life sciences and technology businesses are growing rapidly and represent the dominant sources of new space requirements so far in 2022. This shifting demand profile is changing the dynamic of the marketplace, the requirements placed on product and the basis on which that product is occupied. Landlords take note.
While the uncertainty generated from externalities is having the biggest impact on the market presently, the impact of technology, the demands placed on the office workplace and the changing face of the occupier are factors with longevity. Clearly, each will play out in different ways across different markets. In an office market as diverse as the south east it is vital to have a detailed and granular understanding of current market conditions and future dynamics. We are delighted to help.
Download Navigating the property lifecycle PDF