Top of the London market?

London may be reaching the top of the market, office and residential markets may be plateauing, according to EG Data. Both residential and office markets have continually accelerated over recent years, with prices and rents across both sectors steadily growing as London emerged strongly from the recession. Looking solely at 2016 in pure activity terms, the residential market proved a little more robust in the face of growing uncertainty than offices – with overall starts staying constant at roughly 28,000 units, thanks in no small part to an exponential rise in tower development last year. That said, a plateau in construction starts is perhaps a cause for concern when viewed in the context of phenomenal growth in private unit construction starts since 2012. The two separate sectors have been increasingly intertwined over recent years, with conversions from offices to residential units skyrocketing since 2013 – and look set to increase again in 2017, despite a curtailing of activity in permitted development projects. The London office market in 2016 saw a 25% drop in overall activity on the investment and leasing front – with pressure now being applied across submarkets for rental discounts to be made in the medium term, in order to incentivise occupational activity as the UK embarks on its journey outside the European Union. As both sectors steel themselves for the possibility of future turbulence amidst global uncertainty, scrutiny on the performance of London’s key markets will doubtless increase in the coming years if, as we suspect, we have reached the top of the market for residential and offices. EG Data shows how the surge in residential tower development, and the increasing scarcity of the London office market has helped both sectors’ progression since the financial crisis. Click below to watch the video: To send feedback, e-mail graham.shone@egi.co.uk or tweet @GShoneEG or @estatesgazette Click here for all the news, views and analysis from MIPIM 2017