Monday property news update - 17 May
China's housing market boom, the struggle to fill global jobs and the clamour for central London offices
4 minutes to read
Prime London offices in demand
The FT this weekend reported on a bidding war underway among office investors for development land in Shoreditch and asks, what's going on?
We've been touching on the findings of the (Y)ourSpace report in recent notes that reveal how global occupiers are thinking about the big return to work. It's clear the office plays a central role in strategy - some 37% of our respondents said that property played a vital role in attracting staff and half said that offices supported their corporate brand and image.
However, it's the supply and demand imbalance for the best space that's driving a significant amount of interest. As we discussed back in February, even if take-up levels for new and refurbished space were to remain at 2020 levels for the next two years, the capital would face a shortfall of 1.6 million sq ft of office space. By comparison, if take-up were to fall to the levels recorded during the global financial crisis for the next two years, the development shortfall would be nearer 2.3 million sq ft through to the end of 2022.
Plus, although London is the world leader when it comes to low carbon office development, with close to 3,000 "green" buildings, there's still not enough to meet demand. We estimate about 40% of all the capital targeting the London office market this year is focused on green-certified offices.
People are preparing to return to work
From movement sensors to Pret sandwich sales, there are a growing number of leading indicators available to gauge the pace of the return to offices.
In a new Property Market Outlook, Tom Bill looks for clues in the lettings market around the City of London and Canary Wharf. The rental market is a leading indicator for changing tastes because it moves quickly compared to the sales market and Tom finds activity is picking up.
Across E14, the Southbank, Wapping, Shad Thames, south Islington, E1, E2, E3 and the square mile itself, the number of properties that rented in April this year compared to March 2020 increased by 21%.
By comparison, the number of properties rented in the two central London boroughs of Westminster and Kensington & Chelsea rose by 2.7% over the same period. Across the whole of London, there was a decline of 12.5%.
Staff shortages
Businesses are ramping up a search for staff amid the reopening of the hospitality sector and in many cases are struggling to fill positions, with more than 10 jobs on offer for every job-seeker in some cities.
Adverts on jobs search site Adzuna jumped to 987,800 in the first week of May, up by 18% from the end of March. A monthly survey by the Chartered Institute of Personnel and Development and Adecco suggests two-thirds of employers aim to recruit in the next three months, and just one in 10 plan to cut staff.
Adzuna puts staff shortages in-part down to an exodus of foreign workers, a trend repeated in the US and Australia. Indeed, the New York Times had this piece on restaurants cutting lunch hours and petrol stations paying signing bonuses in attempts to fill positions.
The debate in the US has already turned to the influence of unemployment benefits, with republicans suggesting generous benefits introduced during the pandemic are now undermining efforts to fill positions. If trends continue we can expect that debate to arrive in the UK, which alongside growing fears of inflation will feed scepticism as to how much stimulus is needed to support the economies as they roar back to life.
China's hot housing market
New home prices in China climbed 4.8% in the year to April, the fastest pace in eight months, despite the government's efforts to cool the market. Gains have been particularly strong in luxury property markets - Shenzhen, Shanghai and Guangzhou lead our latest Prime Global Cities Index with growth of between 19% and 16% during the past twelve months.
The data poses a challenge for policy makers, which have already moved to limit banks’ property-related lending and have added more stringent requirements for Chinese developers seeking to borrow funds.
The challenge is compounded by retail sales figures released this morning that missed forecasts amid a wider slowdown in consumer spending. How effectively the government manages scale back stimulus while consumers remain cautious about spending will be watched closely by officials globally.
In other news...
In a new Rural Update, Andrew Shirley takes a Danish approach to net zero. In a new Agents' Diary, Chris gauges international demand for prime central London.
Elsewhere - Amazon is set to hire 10,000 UK workers, why radical reform of urban planning is essential, Europe looks hopefully past infection rates to reopen economies, and finally, carbon is now a buzzword on corporate earnings calls.
Photo by Sincerely Media on Unsplash