As the global commercial real estate industry continues to evolve, the United Kingdom’s commercial property market offers top-tier opportunities in the London metro area. Renowned higher education institutions, along with a skilled workforce, have increased the demand for these commercial facilities. Overall good economic growth also helps generate more demand for commercial space.
On a related note, commercial real estate developers and investors seek favorable conditions for their business ventures. The U.K.’s stable legal and regulatory infrastructure continues to meet these needs. In addition, relatively low interest rates attract businesses ready to make a building purchase.
The substantial office space market is a key component of the London commercial real estate marketplace. Tenants range from small startup businesses to multinational corporations’ regional hubs. Greycoat Real Estate — a major player in the office space sector — and its CEO, Nick Millican, have the industry knowledge and resources to navigate this ever-changing business arena.
“The ups for London are time zone, language, and legal system,” says Greycoat’s Nick Millican. “And then you’ve got the very vibrant nature of the city itself and the boutique talent pool you have in certain industries. So it becomes an area where it can suit and does suit businesses to have, whether it’s a European HQ or an HQ, because of those factors.”
The UK Commercial Real Estate Market’s Evolution
Like the United States’ commercial property sector, the U.K.’s commercial real estate market has recently had its ups and downs. Some firms are still navigating rocky economic conditions caused or exacerbated by the COVID-19 pandemic.
To illustrate, many months of mandated business shutdowns led to a shortage of rental receipts. In turn, building landlords and management companies experienced their own financial shortfalls.
Even today, many companies lack the capital to upgrade or modernize properties to make them more attractive to potential tenants. Ironically, the U.K. office space market has plenty of demand for this upgraded rental inventory.
Although 2023 presented significant challenges, 2024 could bring the favorable conditions needed for an industry rebound. For perspective, the U.K. commercial real estate market is predicted to display a compound annual growth rate of 1.54% between 2024 and 2028.
2023: A Mixed Bag of Results
The U.K.’s commercial real estate market faced multiple headwinds in 2023. Persistent high inflation, compounded by high interest rates, understandably discouraged commercial real estate investments. To make matters worse, some commercial property sectors saw decreased values in 2023.
The U.K. building consultancy company Cushman & Wakefield projected that the commercial real estate sector would see positive growth. The firm also predicted that value-added projects would keep attracting the interest of prospective tenants and investors.
Cushman & Wakefield foresaw favorable leasing rates at the market’s higher end. In fact, the firm said that the most in-demand properties have seen impressive leasing rates during the past year.
Says Greycoat’s Nick Millican, “The best office buildings are letting very well at record rents and there’s really a two-tier market. Most people look at it from a location of specification perspective, which is doing very well, and then buildings which are not in good locations and don’t have good specifications are sort of being left behind to some degree. We’re seeing a bunch of those buildings being repurposed, reinvented for non-office use.”
Snapshot of the UK’s 2024 Office Space Market
The U.K.’s office space sector, especially in the Central London market, continues to realize robust demand for space in highly desirable locations. Regardless of companies’ specific needs, businesses expect modernized office environments that combine appealing aesthetics with clean functionality.
The U.K.’s office space sector is also seeing increased demand for flexible workspaces. As the COVID-19 pandemic winds down, some firms still allow employees to work remotely. This can reduce the ongoing demand for office space. Concurrently, the gig economy’s growth means contractors may only need office space on an as-needed basis. Together, these factors have spurred more demand for short-term office space rentals.
“Obviously London’s labor market is relatively tight and people are revisiting working practices, whether it be trying to get people to come back in from working from home dynamic or just adapting to a more networked business environment that promote productivity in the workplace,” observes Greycoat CEO Nick Millican.
“So there’s quite a lot of revisiting of working practices and what they expect their buildings to offer them and their staff. But what we focus on is making sure the bones of the building enable someone to do that.”
Millican points out that accommodations can include amenities like outdoor spaces and room for cafes and dining. Mixed-use commercial developments often combine office space with adjacent leisure facilities and retail stores. These complementary venues can attract employees for lunch or easy-access shopping. In certain cases, these amenities could be a factor in a prospective employee’s choice of workplace.
Growing Emphasis on Sustainability
The U.K.’s commercial real estate market — and particularly the office and commercial sector — continues to adopt environmentally friendly, sustainable construction and refurbishment practices. There are two primary reasons behind this rising trend.
Today, forward-thinking developers attract eco-conscious tenants in multiple ways. Specifically, crews install energy-efficient HVAC systems, green roofs, rainwater collection assemblies, solar panels, and other environmentally sound components. These features typically appear on newly designed buildings, although refurbishments may contain certain green features.
Says Nick Millican, “The major thing for sustainability is carbon and energy performance. There’s business travel, there’s how people travel to work, then there’s the carbon use or footprint of the building itself that they occupy. Anecdotally, we see that people are cutting down on business travel for carbon reasons rather than cost reasons. And there’s a big focus on giving staff the option to come in via public transport or bikes for example, to reduce that. And then the third piece, which typically is actually the biggest user of carbon for a professional services business, is the underlying real estate.”
The Greycoat exec adds that eco-conscious enterprises are looking into refurbishing existing properties to be more sustainable rather than construct from the ground up.
For reference, a vacant building costs less to refurbish than an occupied one. Once complete, the structure can immediately be listed for occupancy. Owners of energy-inefficient office buildings should strategically make upgrades before the building lease expires.
Greycoat Real Estate Makes Its Mark on the Central London Office Market
Amid the U.K. commercial real estate market’s challenges, Greycoat Real Estate sees many opportunities. Based in Central London, this independent real estate firm has helped to shape the evolving marketplace for more than 40 years. Founded in 1976 as a public company, Greycoat became a private firm in 1999.
With many redevelopments under its belt, Greycoat recently broadened its horizons to include strategic partnerships and multifaceted projects. In 2023, Greycoat strategically amplified its presence in this world-class commercial property marketplace.
During 2023, Greycoat relocated to 15 Suffolk Street, its West End theater district property co-owned with the Heitman investment firm. This five-story, 1950s-era property has undergone two refurbishments while keeping its iconic appeal.
In late 2023, Greycoat Real Estate teamed with a well-known Japanese company, Mitsui Fudosan. Together, the partners completed Sancroft’s office space letting, bringing the 15 Newgate Street building to full occupancy. This impressive complex previously served as Goldman Sachs’ corporate headquarters.
In 2024, Greycoat Real Estate, led by CEO Nick MIllican, continues to expand its reach in the Central London commercial real estate market. The firm’s talented associates apply their industry knowledge and extensive connections to help the firm’s clients achieve their wide-ranging goals.
