The UK office sector attracted £350 million of investment in February 2021, up slightly from January’s £230 million, according to a Colliers report. This is one of a number of emerging signals that there is a sea change in market sentiment around the pace of the recovery of the commercial sector; which is ostensibly accelerating. A recent KPMG survey of 500 firms across 11 countries, for instance, found that just 17 per cent of CEO’s currently plan on cutting back on offices - down from 69 per cent in August.
This is representative of a wider consolidation in the UK commercial sector, in part attributed to the resilience of returns through the pandemic, as well as resolutions in the aftermath of Brexit such as the “Memorandum of Understanding” confirmed by the UK government with the EU. Such measures are designed to facilitate a ‘stable and durable’ basis upon which to build co-operation and maintain the prominence of the UK financial sector in particular globally.
Colliers’ latest Property Snapshot observed a total of £2 billion capital investment across the UK commercial sector in February, noting that this was driven by stable yields in the office sector, according to the MSCI index. Approximately half of this investment is attributed to foreign investors, with further ‘dry powder’ deployment expected in the coming months to capitalise on the recovery of the sector.
With travel set to resume, and a world-leading vaccination rollout programme underway, the return to the office in H2 2021 is envisaged as a resurgent trend with both investors and occupiers looking to actually increase footprints rather than consolidate. A flight to quality is the overriding theme, with best-in-class prime stock in short supply and therefore highly resistant to rental volatility.
The research finds that only 17 percent of global executives are looking to downsize their office space as a result of the pandemic. In contrast, 69 percent of CEOs surveyed in August 2020 said they planned to reduce their office space over 3 years