Firms in London CBD quietly starting to rent large offices again

London

LONDON'S pandemic-struck office market is crawling back to life. A slew of large companies, from Netflix to Morgan Stanley, are in the process of undertaking big office moves that show demand for the biggest and best buildings is recovering from lockdown lows.

In two of the largest potential deals since the virus struck, law firms Travers Smith and Latham & Watkins are close to leasing new headquarters in the City of London, London's historic financial district.

The encouraging signs for landlords follow months of grim data on office leasings, with deals slumping by almost half in the financial district this year.

The recent burst of activity is mainly confined to large new developments, and as lockdown rules return to London, there are still fears that vacancies could soar if more companies embrace home-working for the long-term.

"There is a scarcity of large modern office space," Bloomberg Intelligence senior analyst Sue Munden said. "This may be encouraging large occupiers to secure space now, despite the uncertainties around remote working."

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For companies needing a lot of space over the next few years, there are few options.

That is because developers were already taking a cautious approach to new speculative projects in the past four years due to Brexit uncertainty. With the added doubts of a severe recession and concerns about the long-term future of offices, there has been even less new construction.

The number of new office developments starting in the city of London fell almost 60 per cent in the six months till September, Deloitte Real Estate data showed.

There are also growing signs that investors have noticed. KKR & Co has bought a stake in London office developer Great Portland Estates, while Brookfield Asset Management has built up its stake in British Land Co this year to become its largest shareholder, Bloomberg data showed.

Deals to buy offices are also showing signs of recovery after collapsing earlier this year.

Canadian real estate investor Cadillac Fairview last week agreed to buy White City Place in west London, while Singapore-based Suntec Real Estate Investment Trust agreed to buy a 50 per cent stake in the Nova development in London's Victoria district. BLOOMBERG