Market digest

Key findings from Avison Young’s Q1 2023 U.S. market overview include:

• Leasing activity slowed to the second-weakest amount since 2001, -42.2% from 2001 to Q1 2020 and -27.5% from post-COVID averages.
• Flight to quality remains pronounced, especially in markets such as Manhattan (+28.4%) where new construction demand is strong.
• Sublease availabilities increased to a new record in Q1 2023, more than doubling from Q1 2020 levels as tenants continue cost containment efforts.
• Tenant leverage has accelerated in U.S. gateway markets, with landlords offering more generous free rent periods and tenant improvement allowances.
• Tenants have refocused on sustainability, especially in a supply-rich market. LEED Platinum offices have consistently outperformed peer properties.

Download your copy of Avison Young’s Q1 2023 U.S. market overview here. 

Instant’s latest UK research highlights occupier’s increased demand for flexibility and agility. This desire for additional flexibility is being reflected in the polarisation of occupancy rates between traditional and flex offices. 

Occupancy rates within London continue to outpace the UK average sitting at 84%, driven by the adoption of flex from sectors that have typically favoured traditional office leases in the past. One key example is financial services firms, in the last quarter the number of flex desks occupied by the financial sector has doubled. 

Read the full article here. 

Clutton’s report focuses on the importance of future-proofing digital infrastructure so that the UK can cope with future technical advances that will come.  

When considering the commercial sector, digital connectivity is required for asset owners to meet their ESG targets as ESG monitoring can’t work without high-grade digital capacity.  

Also, as technology has evolved so have people’s expectations where, “gigabit connectivity is now more of a utility than a service. It is a necessity,” says Ian Scott, head of property at Cadogan.  

For more insights on future-proofing connectivity, download Clutton’s report here. 

Key takeaways from Cushman & Wakefield’s Q1 2023 U.S. Office MarketBeat include:

• Occupiers are looking for cost-cutting opportunities impacting leasing activity which has declined 23% quarter-over-quarter
• Increase in sublease availability which now accounts for 15% of overall vacancy
• Elevated vacancy likely to increase throughout 2023 but is expected to stabilize in 2024 as the economy recovers

Download your copy of the MarketBeat report here. 

Savill’s regional office spotlight provides an outlook for the UK’s Big 6 markets, including Bristol, Birmingham, Manchester, Edinburgh, Leeds and Glasgow.

One of the key observations is that people are still coming to the office and although it may not be five days a week there is a demand for first-rate space ‘where in many cases occupiers who are downsizing are willing to pay an average of 54% more rent per sq ft in order to secure a higher quality of space.’

Savills’ also reported that ‘Five of the Big 6 markets recorded prime rental increases in 2022, with Bristol and Leeds achieving 12% and 6% growth respectively.’

Rental increases are not just a trend for 2023 but will continue an upwards trajectory where Savill’s predict that ‘prime rents could be as high as £45 per sq ft in Bristol, with all of the regional Big 6 markets expecting to surpass the £40 per sq ft in 2025.’

Get your copy of the research here. 

The Urban Land Institute and The Instant Group have surveyed office occupiers, landlords and third-party advisors globally to understand how changing occupier behaviours and broader macro trends impact the demand for workspace. 

The findings show a disconnect between landlords and occupiers, therefore, aims to offer solutions to help landlords navigate the changing needs of their occupiers. 

Get your copy of the research here.