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A survey published by Deloitte Real Estate on Wednesday (17 May) revealed that the amount of vacant office space in London has surged in the past 15 months, reported Reuters.
According to the study, available supply soared by 36 percent in 2016 due to weaker demand for pre-used office space and the longer time spent on closing rental agreements.
But following the Brexit decision, this is expected to increase further due to the likelihood that businesses would leave the UK. In fact, vacant supply increased by an additional 19 percent in Q1 2017.
Despite the situation, developers are continuing to build new office buildings to the point that new office completions in London this year are forecasted to hit its highest annual level since 2003.
“Developers are having to get on with developing buildings because we don’t know what situation we’re going to be in come 2019,” said Deloitte’s Property Research Manager Shaun Dawson.
“The problem you have is that it is pretty difficult to stop when you’re so close to development. You have to have contracts in place and all the builders … so it’s pretty difficult to stop.”
Notably, banks may need to reduce their office space in London and transfer some jobs to EU-member countries if it still wants to do business with the union, in the event that the UK government losses access to the European single market in the Brexit negotiations.
Despite the likelihood of such exodus, Deloitte’s study shows that 3.9 million sq ft of office space entered the market in the six months to 31 March 2017. That was the largest amount completed in central London in just one survey since 2004.
Moreover, developers broke ground for 28 new projects in the said six-month period, boosting the supply pipeline by 3.2 million sq ft.
Dawson expects the above-average office completions to continue in the next five years, leading to levels not seen since the early 90s. Against this backdrop, rents of office space in London could decline if demand is impacted by the UK’s looming departure from the EU.
This article was edited by Denise Djong.
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