UK landlords bet on green offices as hybrid work makes tenants picky
By Aby Jose Koilparambil
March 28 (Reuters) -Top London-focused landlords are betting on environmentally compliant office spaces at prime locations that offer higher rents as tenants become more selective in their real estate investments amid hybrid work trends in an uncertain economy.
UK commercial property firms have cashed in on this trend, logging steady growth in rental incomes and occupancy rates over the last year even as elevated interest rates hamper growth elsewhere in their business.
Mark Ridley, the CEO of global real estate services firm Savills SVS.L, said his group is seeing rental growth in prime central London offices with Japanese, Australian and European investors looking at the UK, which has outpaced other markets in pricing recovery.
Ridley said environmentally sustainable spaces have become the "real definer" of demand, particularly in the offices segment.
About 20-23% of the stock of built buildings in London meets sustainability standards and that is where everybody wants to be, Ridley said.
Savills has forecast an average 2.4% rental growth in 2024 for City of London Grade A spaces - property refurbished or redeveloped in the past decade - while for Grade B properties, rents could decline by 2.5% this year.
For prime properties, which account for the top 10% of rents, rates are forecast to grow by 2.9% this year.
Demand for office spaces in London has risen to the highest level in a decade, with companies on the hunt for nearly 12 million square feet of real estate, according to a study by consultancy Knight Frank.
Major London-listed landlords are better placed to cater to this demand.
"Landlords in the listed segment have done a very good job of making sure their assets are in the right locations, and also largely own properties that are either best-in-class buildings or can be converted to premium spaces in an economical way," said James Carswell, real estate equity analyst at Peel Hunt.
British Land BLND.L Chief Financial Officer Bhavesh Mistry said smooth transport connectivity and sustainability credentials have become a crucial differentiator for attracting tenants.
To be sure, the office space sector still faces some stumbling blocks, including a risk to demand from sectors such as the tech industry, which account for a significant chunk of real estate demand and are looking to cut costs.
Facebook owner Meta META.O last September paid 149 million pounds ($182.4 million) to British Land to break its lease on a central London office building, underscoring the pressure in the tech sector.
"If you have got 40% of your building occupied by back-office functions, and you're under pressure to reduce costs, I think those major occupiers will shrink their footprint," said Mark Allan, CEO of Landsec.
Allan said Landsec plans to spend more on multi-let buildings going forward rather than single-let, headquarters space to avoid exposure to any single sector.
($1 = 0.8167 pounds)
Recovery signs https://reut.rs/4bnYqRD
Valuation woes https://reut.rs/3OAMySx
Grade B spaces in City of London have struggled with rental growth in recent years https://reut.rs/43lMvQI
Prime and Grade A spaces in City of London set for good rental growth in coming years https://reut.rs/48WxF4d
Reporting by Aby Jose Koilparambil in Bengaluru; editing by Arpan Varghese and Saumyadeb Chakrabarty
Actifs liés
Dernières actualités
Avertissement : Les entités de XM Group proposent à notre plateforme de trading en ligne un service d'exécution uniquement, autorisant une personne à consulter et/ou à utiliser le contenu disponible sur ou via le site internet, qui n'a pas pour but de modifier ou d'élargir cette situation. De tels accès et utilisation sont toujours soumis aux : (i) Conditions générales ; (ii) Avertissements sur les risques et (iii) Avertissement complet. Un tel contenu n'est par conséquent fourni que pour information générale. En particulier, sachez que les contenus de notre plateforme de trading en ligne ne sont ni une sollicitation ni une offre de participation à toute transaction sur les marchés financiers. Le trading sur les marchés financiers implique un niveau significatif de risques pour votre capital.
Tout le matériel publié dans notre Centre de trading en ligne est destiné à des fins de formation / d'information uniquement et ne contient pas – et ne doit pas être considéré comme contenant – des conseils et recommandations en matière de finance, de fiscalité des investissements ou de trading, ou un enregistrement de nos prix de trading ou une offre, une sollicitation, une transaction à propos de tout instrument financier ou bien des promotions financières non sollicitées à votre égard.
Tout contenu tiers, de même que le contenu préparé par XM, tels que les opinions, actualités, études, analyses, prix, autres informations ou liens vers des sites tiers contenus sur ce site internet sont fournis "tels quels", comme commentaires généraux sur le marché et ne constituent pas des conseils en investissement. Dans la mesure où tout contenu est considéré comme de la recherche en investissement, vous devez noter et accepter que le contenu n'a pas été conçu ni préparé conformément aux exigences légales visant à promouvoir l'indépendance de la recherche en investissement et, en tant que tel, il serait considéré comme une communication marketing selon les lois et réglementations applicables. Veuillez vous assurer que vous avez lu et compris notre Avis sur la recherche en investissement non indépendante et notre avertissement sur les risques concernant les informations susdites, qui peuvent consultés ici.
