In this Hardman Talks, Mike Foster joins Larissa Adams to discuss office investments in the real estate sector.
The overall picture is that rents for the owners of good space are not falling, although we exclude the London Docklands area from this resilience. Valuers for good space see rent stability or minor rises.
The post COVID position on working from home is much worse in the USA, data show, so influences on sentiment from the USA are negative, added to which some high-profile buyers in London Docklands are now exiting at major write-downs. Values have fallen across the board driven by the change in capitalisation rates, a trend which is more than halfway through but is unlikely to reverse in a long while. The yield basis was firm from 2020 to 1H22, rather surprisingly and probably not reflecting the transactions in the market. Transactions are actually quite resilient.
Office assets’ value prospects are not as strong as areas such as logistics, we believe. But the market is quite resilient on a number of measures including a broad and high active demand from buyers and floorspace take-up. 2023 London office take-up was below the ten-year average, but only by 8%.
We also show the remarkable divergence in vacancy rates by location, with Docklands looking very poor.
