Despite headline office rates in London remaining flat in the three months to the end of March 2018, vacancy rates continued to improve. The vacancy rate currently stands at 5.9%, well below the 15-year average of 8% and the peak of 9.2% in 2009, according to new analysis by Cluttons.
The frim believes that this is because many landlords have been far more responsive to the recent downturn than in previous cycles. This is not only in relation to rent and rent-free periods, but also the introduction of greater lease flexibility. They have also been more willing to cap service charges and dilapidations with older style buildings.
They have also had to respond to competition from disruptive office models such as co-working and flexible working. Another factor in the shift in focus to occupiers’ need by landlords is that comparatively few have their hands tied by high company debt ratios compared to previous cycles.
Commenting on the analysis, Faisal Durrani, head of research at Cluttons, said: “Our analysis suggests that landlords are responding positively to the current downturn. However, they will need to continue to evolve their offer if they are to keep vacancy rates at the current low levels. This will involve a greater focus on factor such as wellness and connectivity if buildings are to avoid long-term obsolescence.”