Is our office market safe? Alan Bunce argues that watching the goings on in the US could offer an indication of what could happen to the office market – and the wider economy – in the UK.
Anyone who keeps up to date with business news in the US will likely have seen warnings about the office market there.
Even in New York’s Manhattan district, a mix of home working and rising interest rates has hit the market so much landlords are offering occupiers an average of 16 months rent-free. There are even leases as short as 13 months to try to tempt occupiers to try out space.
Along with many political and economic commentators, the New York Times talks of the office market’s problems potentially spreading far and wide.
If, as many suggest, the state of the US office market triggers more problems for banks which loaned landlords money when demand was healthier, then it’s hard to imagine this is just going to be a US problem.
The empty office space is hard to ignore. It’s evident in many of the UK’s prosperous centres.
In Reading, at one of the most architecturally pleasing schemes, numbers One and Two Forbury Place (a total of approximately 370,000 sq ft between them), as much space is empty as is occupied and, in the case of Two Forbury Place, much of that has been empty since it was built six years ago.
Recently revamped and looking better than ever, Apex Reading, a building which has been among the most popular with corporate occupiers for more than 30 years, is two thirds full.
Agents have long talked about some big requirements in the Thames Valley market; Lonza, Wood Group, Microsoft etc, but is the long wait for these to come about more to do with caution than there not being the right product?
It’s tempting to try to paint a brighter picture but the evidence of our own eyes shows us empty office space, collapsing banks and breath-taking national debt either side of the Atlantic.
Who knows what the result of all this will be? I wouldn’t try to predict it. Economists can tell you why things happened but they are poor at forecasting them before they happen. The 2008 banking crash proved that.
But you don’t need to be an economist to see that things are not the way they should be in a healthy economy.
Hopefully the Thames Valley’s newest and best office scheme, One Station Hill, will prove doubters like me wrong. But as ever, watching what is happening in the US is probably the best way of seeing what’s coming our way and, as far as I can see, it’s not pretty.
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