Office space shortage is forecast

Knight Frank has forecast a chronic shortage of sustainable office stock in the South East.

Its M25 and South East Office Market Report states that take up in Q1 of 2021 was the highest since Q4, 2018 but suggests much of the space currently available falls short of the likely future environmental requirements.

The report says a likely mandatory EPC rating of B by 2030 would dramatically alter the dynamics of the South East office market, exacerbating the current under supply of ‘best-in-class’ space.

Emma Goodford, partner and head of national offices, said: “The leasing activity we witnessed in Q1 demonstrated a continued commitment to offices, particularly in Thames Valley locations with an established ecosystem. Despite the uncertainty around the role of the office and the expectation of dynamic and hybrid work patterns, take up during the quarter was consistent with the 10-year average and vacancy rates have remained below the long-term trend.

“Going forward, net zero targets will be an increasingly significant factor in lease negotiations given that sustainable real estate is critical to meeting the UK’s 2050 target.

As the regulatory framework to decarbonise the sector continues to tighten, a greater proportion of occupiers and landlords will need to assess and disclose their carbon footprint.

“With low vacancy rates in the highly sustainable office stock categories, and a slower development pipeline, we expect to see a shortage in new best-in class space continuing to characterise the market until at least until 2025.”

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