The Fight for Office Space

Speak to all the so-called property experts and they will all tell you that Britain’s economic recovery is well under way. It’s been a long time coming. At Foundation Recruitment we work across the whole of the UK and there is little doubt that London is the place to be for job seekers. New roles are coming to the market thick and fast; encouragingly across multiple surveying disciplines. In the last 3 months, we have been working with a diverse range of London based clients looking to add new people within investment, development, asset management, property analysis, agency and fund management.  It is certainly not unusual for the UK’s recovery to start in London. It has always been the way after every other recession. After a period of time, it starts to spread out into the regional market. And it has started.

Rents are rising again within the office sector. According to this months Estates Gazette (10^th May 2014), they are already on a bull run in London, currently sitting at a 9.1% rise. New businesses are being established. Well established businesses are growing. Great news for the economy but is there enough supply to meet demand? The almost non-existent amount of speculative grade-A office development in the UK over the last few years has resulted in a shortage of brand new space for occupiers. Small to medium sized occupiers are subsequently being priced out of grade-A space and find secondary space the only realistic option.

Office leasing activity in the main UK regional cities outside London is at its highest for five years, according to research from CBRE.  In the first half of 2013, 1.6m sq ft of office space was let, driven by demand for larger premises. The competition for space is therefore seemingly hotting up with a recovering market driving a real increase in overseas investors looking to establish a base in the UK. London has always been able to attract overseas, blue-chip companies to the UK but British Cities now possess all the foundations to grow solidly over the coming years. With demand for office space far outstripping supply, coupled with a distinct lack of speculative development since 2008, the competition is set to become even hotter over the next 12 months as the UK economic recovery really starts to gather momentum. This worrying outlook for the UK business space market in the short to medium term has resulted in a marked increase in the sharing of office space and co-working. Whilst by no means a new trend, the recent recession has made such a prospect a worthy consideration for growing corporate businesses.

On the plus side, speculative development is making a come back; development funding is now easier to come by and cranes are once again a regular fixture on the UK’s skyline. At Foundation Recruitment, our General Practice team have been instructed on 5 development roles within the last 3 months alone, more than in the previous 12 month period. However, it will take a number of years for these new schemes to come to the market. For the time being the competition for space is set to remain. Office sharing will continue to be a viable option for growing businesses and secondary space will continue to be refurbished to make it a more attractive option for potential new tenants.