The shortage of "top tier" office space
Making sense of the latest trends in property and economics from around the globe.
4 minutes to read
Tiered office markets
Demand among office occupiers for the best available space with the highest sustainability credentials is creating a tiered system across global markets.
The vacancy rate in Dublin looks high at 10%, for example, especially when you consider the fact that occupiers signed for 1 million square feet of space in the first half of the year. However, there are now just three buildings standing that have in excess of 50,000 sq ft of space available that are also LEED Platinum certified - or those that can be considered top tier from a sustainability perspective. Platinum certified space accounts for just 4.5% of available space.
Of the total space available, 44% has a C energy rating or lower. These buildings are unlikely to achieve long leases or be attractive to tenants on a short-term basis without rental incentives. When you remove those buildings from the equation, the vacancy rate stands at just 5.2%.
This is all from our latest Dublin Office Market Overview, which you can read here. As the team notes, there has always been a divide between prime and secondary, but the focus on the detail and the components of what makes each building an attractive option is becoming laser sharp.
Bumper hikes
The Bank of England's first 50-basis-point rate hike since 1995 is likely to take place on Thursday, taking the base rate to 1.75%.
There has been a fair amount of signalling that this moment would come if inflationary data continued to come in hot, and the Fed's aggressive tightening is piling pressure on BoE policy makers to follow suit. The pound has tumbled around 9% against the US dollar so far this year, raising the cost of imports and fuelling inflation further.
How far and fast we go from here remains a point of contention. Oxford Economics expects the base rate to finish the year at 2%. Capital Economics puts it at 2.5%. The BoE’s market implied path for rates puts it at 2% this year, rising to 2.75% in 2023.
There are good reasons to believe the pace of tightening will slow from here. “Core inflation”, which strips out fuel, energy and food, peaked back in April. All sorts of economic indicators are signalling that the prevailing slowdown will continue, which should tame rising prices. Private sector activity has slowed to a "near standstill", according to the CBI, and a gauge planned investment from company directors is running at its lowest level since October 2020, to take two readings from the past 24 hours.
Mortgage lending
Mortgage approvals for the purchase of homes dropped to 63,700 in June, from 65,700 in May. That's now running below the 12-month pre-pandemic average of 66,700, according to Bank of England figures published on Friday.
The ‘effective’ interest rate – the actual interest rate paid – on newly drawn mortgages increased by 20 basis points to 2.15% in June. The rate on the outstanding stock of mortgages ticked up 4 basis points, to 2.11%.
The same data release revealed that consumers borrowed an additional £1.8 billion in consumer credit in June, following £0.9 billion of borrowing in May. That's running well above the pre-pandemic average of £1 billion and was split by about a billion on credit cards and a further £800 million on other forms of consumer credit, such as car dealership finance and personal loans - all of which hints at the size and scope of the cost of living squeeze.
Transparency
From 9am this morning, overseas entities who want to buy, sell or transfer property or land in the UK must register with Companies House, outlining who their registrable beneficial owners or managing officers are.
The measures, which form part of the Economic Crime (Transparency and Enforcement) Act 2022 passed back in March, will also apply retrospectively to overseas entities who bought property or land on or after the 1st January 1999 in England and Wales and the 8th December 2014 in Scotland
'These overseas entities will need to register with Companies House,outlining who their registrable beneficial owners or managing officers are by 31 January 2023.
In other news...
The dragon awakes – higher inflation and the implications for property - some perspective from our team in Australia.
Elsewhere - The number of people claiming non-domiciled tax status in the UK fell to a record low in the first year of the Covid-19 pandemic (Bloomberg).