Corporates to look for office space outside London in 2020

DeVono Cresa (DC), the UK’s leading occupier-only consultancy, has released its 2020 predictions for the commercial property sector, alongside market analysis for Q4 2019, via its quarterly ‘Occupier’ publication. 2020 predictions, including a continued uptick in demand for office space outside London, cover anticipated trends in commercial property, with special focus on the impact of Brexit negotiations, and the UK’s changing relationship with the European Union.

DC Q4 market data suggests that central London office market demand will remain strong throughout 2020, with 2019 figures pipping the 2018 annual high by 3%. In spite of Brexit and knock-on economic concerns, more businesses than ever have committed to taking London office space. The move towards top-quality space continues, with close to half of all 2019 leased space, being that of Grade A quality. Businesses are turning to newer and more modern space to support changes in the workforce and workplace. Available office space across central London is now at its lowest level since 2016.

“Phase 2 of Brexit, global trade battles and a health pandemic are doing little to strengthen business confidence. Yet despite this, regional city office markets are experiencing a renaissance in tenant demand. Current office supply-demand dynamics across central London are directly contributing to greater rental growth intensity in 2020,” said Shaun Dawson, Head of Insights at DC. “The City of London, in particular, just keeps on growing. Leasing demand in the Square Mile peaked in 2019, with the number of businesses taking space increasing by 25% over the year,” he adds.

The financial sector was the most active in 2019, with a 24% share of leasing activity. DC data indicates that the industry has defied downsizing expectations as a result of Brexit. However, the picture is not the same for all sectors. The technology sector accounted for only 13% of leasing activity in 2019 – down from its 15% market share in 2018.

Regional city office markets are experiencing a surge in tenant demand. Cities across the UK experienced robust growth in office leasing in 2019. Tenants, both domestic and global, are set to give more focus to UK cities such as Manchester, Birmingham, Leeds and Bristol in 2020. In Manchester specifically, city-centre office take-up surpassed its long-term average by a staggering 23 per cent in 2019.

The serviced office market continued to grow in 2019. DC foresees a renewed focus from serviced office providers seeking to differentiate themselves in 2020, by heightening their service provision, and investing in relationships with existing occupiers.

Technology adoption, and its application within the workplace also continues to impact real estate decisions. Operational analytics, and 5G for workers, both represent some of the areas of technology that will gain greater adoption levels in office environments throughout 2020.

Other noticeable trends captured within this quarter’s Occupier include businesses becoming increasingly aware of their role and responsibility in tackling climate change, and the importance of environmental issues. DC predicts that 2020 will see green issues move higher up the corporate agenda, particularly with the COP26 summit being held in the UK at the end of the year.

Overall the commercial property sector outlook for 2020 is positive across the UK. “Businesses across London have proved resilient to the malign of recent politics, with leasing levels above average for the past three years. We don’t expect to see the degree of interest in London office space dissipate over the year, and with increased interest in the UK’s regions, 2020 looks set to be a positive year for the commercial property sector nationally,” Dawson adds.