| The death of the office has been 'overdone'
The office sector has had to 'adapt to survive' during the coronavirus pandemic as travel restrictions and a switch to working from home have prompted many organisations to reassess their requirements, both immediate and post-pandemic.
According to a new report from Carter Jonas, the London office market continues to shift in favour of tenants with significant discounts available on advertised rents and an increase in rent free periods on offer. In some locations, the report says up to two-and-a-half years are available rent-free as landlords look to combat weak demand and rising vacancy rates.
But according to Dan Francis, Head of Research at Carter Jonas, no-one should be thinking about sounding the death knell for the office market yet. "The forecast death of the office has been overdone. The fact remains that an overwhelming number of occupiers understand the importance of the office as a focal point to foster productivity, collaborative working, innovation and, importantly, employee wellbeing."
Knight Frank's Asia-Pacific Prime Office Rental Index for Q4 2020 meanwhile, reveals a 0.8 per cent quarter-on-quarter decrease and a 4.9 per cent year-on-year decline, due to muted demand from occupiers and continued new supply additions across the region. But in a sign that a recovery of sorts could be underway, of the 22 cities tracked by the index, 10 recorded either stable or increased rents in the past quarter, as compared to eight in the previous quarter.
We also report on new data from insurance comparison platform Quotezone,co.uk which suggests that in terms of insurance quotes for office space in the UK, demand is down by a huge 49 per cent compared to 2019. By comparison, quotes for high street takeaway outlets, and B&Bs, guesthouses and hostels, are up 4 and 3 per cent, respectively.
Sticking with the recovery theme, Colliers says that direct real estate investment volumes bounced back strongly in the fourth quarter of last year. The full year total of EUR252 billion was still 25 per cent down on 2019, but some countries managed to outperform. In Denmark, volumes were up 20 per cent year on year, while Germany hit EUR59.2 billion representing the third highest end-of-year result in the past ten years.
"We expect cross-border investment to rise this year as the vaccine is rolled out, allowing a relaxation of travel bans and quarantine measures," says Richard Divall, Head of Cross Border Capital Markets, EMEA at Colliers.
Some of that investment could be headed for retail warehousing, which presents 'significant' investment opportunities, according to a new report by Savills and Ediston Property Investment Company, with the sector continuing to outperform other retail segments despite the rise of online shopping.
Paddy Allen meanwhile, the newly appointed Head of Operational Capital Markets in Colliers' National Capital Markets team, has a different take on where the smart money will be headed in 2021. "A weight of capital is looking to build a presence in operational real estate, with particular appetite for various residential bed sectors such as build to rent and student accommodation," he says.
Despite continued travel restrictions, global real estate investors will still be targeting Europe in 2021, according to Savills, with the international real estate advisor predicting that non-European capital will build on transaction volumes recorded last year, resulting in a 10-15 per cent, year-on-year uptick in activity to EUR120 billion.
"Political tension, oil price volatility and a desire for geographical diversification continue to be push factors bolstering outflows towards Europe," says Mike Barnes, European Research Associate at Savills.
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