Savills: End of work from home drives recovery in office property market
International property services company Savills has predicted a strong commercial property market this year driven by cheaper financing, the sustainability agenda and workers’ return to the office.
The FTSE 250-listed firm told the market this morning that while it expected challenging conditions to continue, “most markets are in recovery”.
However, the firm added that geopolitical uncertainty, volatility in bond yields and “high for longer” interest rates were behind the “somewhat shallower than expected” recovery this year.
“Whilst current financial markets are characterised by uncertainty, sentiment has turned to expectations of progressive reductions in the cost of capital being likely during the year,” Savills said.
“We expect re-financing-driven activity, the sustainability agenda and the trend towards corporates requiring greater office attendance for staff, to continue to be positive for transaction volumes… These factors lead us to expect continued improvement through 2025,” the firm added.
End of work from home drives office uptake
Demand for sustainable buildings has been driving office space take-up in London as half of London offices are set to be ‘unlettable’ due to higher environmental standards by 2027.
The number of offices politely requesting staff return to in-person work has also continued to grow, with ad giant WPP, Lloyds and the civil service implementing return-to-office policies recently, with varying success.
In August, Savills noted the vacancy rate of central London offices had fallen to 8.8 per cent, the lowest level in over three years.
In November, real estate consultancy Avison Young noted that central London office take-up for the thrid quarter reached 3.2m sq. ft, bringing vacancy rates down to 6.9 per cent, a 0.2 per cent decrease from the previous quarter, and closer to the 10-year average.
Savills’ predictions chime with West End’s biggest landlord, Shaftesbury Capital, and British property investment trust Landsec, both of which have noted a trend towards sustainable, high-tech offices.
“The good availability of credit remains supportive to this [trend], although we are mindful that changes in longer-term interest rates will likely influence the pace at which momentum improves from here,” Landsec has said.