The UK commercial office market has shaken off the worst of the economic challenges we have seen in recent years and is performing well. The year is off to a good start and the information available for Q1 indicates that 2024 looks to be a successful 12 months for commercial office space.
The average office rent grew by 4.2% in 2023 according to Savills. A combination of factors lead to this including companies switching to hybrid work and upgrading their offices, the cooling of inflation and the subsequent fall of interest rates. Together, this created circumstances more amenable to businesses looking to invest in the future – which includes choosing new office space.
The latest quarterly report from Cushman & Wakefield shows that the UK’s “Big 6” office markets (Birmingham, Bristol, Edinburgh, Leeds, Manchester and Central London) saw 3.4m sqft of office space taken in just three months. This is a 32% increase over the previous quarter and 6% higher than the five-year quarterly average.
What type of office space is most popular with occupiers? Businesses have a very strong preference for Grade A space which accounted for 70% of all leases in the last quarter and 57% over the past five years on average.
Looking a little more closely at the numbers, 71% of office take-up in Central London is Grade A space, while that number is 66% in the other five big city markets. Both of these numbers are exceptionally high and likely reflect a number of factors.
Grade A office space for rent is more likely to include a range of amenities that older office space doesn’t. It is also more likely to be either new or newly renovated and designed to achieve a higher level of sustainability. In a time when companies have to meet ESG obligations and need to attract employees who are more climate-conscious than ever before, this matters a great deal.
This so-called ‘flight to quality’ is expected to continue in Q1 2024 and the year ahead. It is also likely to have knock on effects for office rents as demand for those commercial spaces in the best locations, providing the best quality and with environmental performance to match will outstrip the available supply in 2024.
This increased demand for quality space will keep pushing rents up in all of the UK’s office markets, with CBRE anticipating 3% growth in rents at a minimum over the rest of the year. We are likely to see this translate into new rental records achieved by the best commercial office spaces.
The demand can also be seen in the number of pre-lets in place for offices which are still in construction. Approximately 37% of space currently in construction across the UK has already been let by business trying to get a step ahead of the competition by securing the highest quality new space.
If you are looking for a new office space that meets the demands of hybrid working, occupies a great location and can attract an environmentally conscious workforce to your company, the time to act is now.
Offices to rent which provide all that alongside market-leading amenities have never been more in demand. Locking down a future-proof space now could provide a competitive edge to businesses over the rest of 2024 and beyond.
Looking for Grade A UK office space to rent in the UK’s best markets? Browse our availability today and get in touch with the team.