With London’s office market on the upswing—marked by a 1.5% increase in gross rental income and growing rental values – savvy investors are being urged to seize this prime opportunity to explore new ventures. Property experts at Savoy Stewart highlight why the UK office market is emerging as a hotspot for investment.
London’s Economy Set to Surpass Global Giants
London is poised to outpace major cities like New York and Paris by 2030, with the UK’s economy forecasted to experience rapid growth. With a projected 1.9% rise in Gross Value Added (GVA) between 2024 and 2027, and an anticipated surge in job creation, the city’s resilience in the face of Brexit, COVID-19, and the cost-of-living crisis solidifies its place as a premier global hub. As interest rates fall to 5%, borrowing costs for investors will be slashed, making this the ideal time to dive into London’s thriving office market.
Skyrocketing Rents Amidst Supply Crunch
London’s leasing activity has surged by 21%, driven by high demand for eco-friendly, state-of-the-art office spaces. With 37% of office developments scheduled for completion in 2024 already snapped up by eager tenants, investors can expect rising rents due to fierce competition. Prime office properties in the UK are forecast to deliver annual returns of up to 11% by 2028, with cities like Manchester, Bristol, and Edinburgh also seeing strong growth, making this a golden moment for investors to capitalise.
Falling Interest Rates Fueling Investment Prospects
As inflation trends downward, the Bank of England is expected to cut interest rates in late 2024. With borrowing costs set to drop from the current 5.25% rate, financing office properties becomes significantly more affordable, allowing investors to maximise returns on investment (ROI). The recent correction in the UK office market has created an ideal climate for investors to acquire properties at attractive prices, positioning themselves for rental growth as the market rebounds.
Tech and Innovation Fuelling Office Demand
London has reinforced its position as a global tech capital, raising over £7.4 billion in venture capital for start-ups and scale-ups this year alone. AI giants like CoreWeave and Scale AI are setting up European headquarters in London, further driving demand for office space. Since 2014, London has led the world in tech foreign direct investment, and with this continued growth, rents and occupancy rates are set to soar, presenting lucrative opportunities for investors.
Coworking Spaces on the Rise
Coworking spaces are exploding in popularity, with global demand set to double by 2024. UK landlords are responding by planning a 54% increase in flexible office spaces by 2030. This shift towards adaptable work environments underscores the potential for investors to tap into the expanding coworking market, as businesses increasingly seek flexible solutions in the evolving office landscape.
With London’s booming economy, surging rental yields, falling interest rates, and growing demand for tech and coworking spaces, the UK office market is an investment opportunity not to be missed.
