New figures from Re-Leased, the cloud-based commercial property management platform, suggest that London’s office market has failed to re-ignite despite the end of coronavirus restrictions.
Three weeks on from rent collection day, Re-Leased said its analysis of London office rents due for the June quarter this year showed just 52% had been collected at day 21, the lowest figure at this point in the quarter since the beginning of the covid-19 pandemic.
London’s office sector has been hit hard by the pandemic-induced trend of working from home, with the latest figures showing rent collection in the capital faring worse than rival cities Birmingham and Manchester.
Birmingham saw rents paid surpass pre-pandemic levels at 89% for the June quarter this year, while in Manchester, office rent collections for the same period were at 69%, up from 59% at the same point last quarter.
Whilst London office rent collection remains subdued, there are some early signs of a return of confidence in the capital elsewhere. Re-Leased’s data shows that potential vacancy risk – meaning the percentage of rent from leases that have ended and are being paid on a rolling basis, with tenants able to leave without any notice – is lower in London, at just 9.4% of leases compared to 24.1% in Birmingham and 15.3% in Manchester.
The latest figures come as the government’s return to work messaging around ‘Freedom Day’ is significantly toned down. Whereas at the beginning of the month we were seeing hints that a return to offices would be strongly encouraged, the onus has now been left on businesses to manage what Boris Johnson referred to as a ‘cautious return to work’, as coronavirus cases continue to rise drastically across the country.
Some ministers are said to be looking at ways of enabling people to work from home indefinitely if there is no requirement for them to commute to the office, although others are said to be keen to encourage more to return.
Caleb Dunn, Commercial Analyst at Re-Leased, said: “Rent collection performance continues to shine a light on the state of the commercial office sector. The level of rent collected for the June quarter so far shows the lasting impact of the third lockdown, and suggests that the effects of remote working are still very much being felt in London’s offices. The capital is lagging behind its rival cities in the regions, and landlords will be feeling the strain after more than a year of restrictions on office working.
Despite this week’s ‘Freedom Day’, caution seems to be on the up as people limit social contacts to avoid getting ‘pinged’, and the confident return to offices we might have hoped for still appears to be a way off.”