London Calling

As a vast number of London office-based employees have been working from home since the Covid-19 lockdown began, the demand for office space in the city has decreased.

Analysts predict that office rental yield could fall by over 10% in many parts of London over the next year, as the property market adapts to an increase of people working from home, according to new forecasts.

Research conducted by property consultancy Carter Jonas comes in the same week that the government told people to work from home if they can, in a bid to help prevent the spread of coronavirus. The move has frustrated landlords and tenants that want people that have worked remotely since March, to return to their offices.

Commercial property firms think there’s still significant demand for London offices, but companies are taking longer to make property decisions due to the coronavirus crisis.

Carter Jonas said: “While landlord’s advertised rents have remained broadly static since the onset of the Covid-19 pandemic, over the next few quarters it’s likely that reductions in rents will become widespread.”

It said typical rents for new, air conditioned, prime located space, will fall across central London.

In Mayfair current prices of £115 per square foot could decline 10.9% by the third quarter of 2021, and the City could witness a 11.4% fall to £62 per square foot over the same period, according to the forecasts.

Michael Pain, head of Carter Jonas’ tenant representation team, said: “Competition is expected to intensify between landlords with vacant new and refurbished space, and tenants that are offering surplus ready fitted out space in sub-lets."