Levelling up could put 2m sq ft of London offices back on market

Almost 2m sq ft of office space in Westminster and central London could be back on the market within years, as the government’s levelling up agenda sees thousands of civil service jobs move from the capital. Savills said the space would probably include a majority of second-hand stock, offices that “may become less demanded and attractive for occupiers in the coming years” as tenants gravitate to high quality, more sustainable workplaces. “The Covid-19 pandemic has resulted in increasing vacancy and availability levels that have not yet returned to their pre-pandemic levels, despite restrictions easing,” the agency said in a report published this month as part of an application for an office-to-care home conversion in Westminster. “This may suggest that there would be an excess supply of space in the market in the short term while the market readjusts. On the demand side, demand for office space decreased during the Covid-19 pandemic and has largely not yet recovered to pre-pandemic levels.” Savills pointed to the planned relocation of thousands of government jobs outside of London as likely to add to the glut of supply. Based on at least 16,231 relocations having been confirmed as of earlier this year – some targeted as early as 2025 – and considering standard employment densities for office space, the agency said between 1.4m sq ft and 1.7m sq ft of office space could be released to the market, “with a likely majority of second-hand stock”. The agency added: “Indirectly, the relocation of civil service may also lead to the move of public sector and public policy consultancy firms, choosing to relocate next to their dedicated agency of expertise rather than remain in central London. This would further release second-hand office space to the market and increase availability.” In the office market review, lodged alongside proposals by care home operator Medici Lifecare to redevelop Dean Bradley House, Savills said it had seen “a sustained occupier demand for best-in-class space and falling levels of demand for lower-end offices”. “While the central London office market is strong and has started to recover since Covid-19 restrictions were eased, both second-hand and new build properties may still face challenges ahead,” the agency added. “Due to the low occupancy levels in central London offices and the slow return of workers, some debate still remains on the impact of hybrid working on demand for office space,” the firm said, noting that its commercial research team’s modelling estimates that demand could fall by 9% by 2026. To send feedback, e-mail tim.burke@eg.co.uk or tweet @_tim_burke or @EGPropertyNews Image © Peter MacDiarmid/REX/Shutterstock