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Over the last few weeks, the question on everyone’s lips: “What does Brexit mean for me as I look for a new office?”
A good question given the London commercial property market is driven by occupier demand and the rental price and lease lengths they are willing to sign for. Brexit uncertainty has meant that Morgan Pryce has already taken advantage of Landlord nerves to secure favourable deals for several clients so the initial signs are positive. Whilst landlords’ agents have not openly announced rental reductions, we have seen increased rent-free periods in addition to more flexibility in lease terms and exit breaks being offered as the market quickly adjusts to the new reality. All as a result of the outcome of the vote and all in favour of tenants, many of whom are currently locked into higher priced rents and – until June 24th – contemplating entering a market heavily in favour of landlords.
Morgan Pryce is now forecasting that post-referendum events will advance the pull-back in the tenant market by 12 months, and even more in the favour of the occupier. As experienced tenant representatives, Morgan Pryce has, for some time, pinpointed Q4 2017 and early 2018 as the point of return to a more balanced market. This presumption was based on the large volume of new and refurbished commercial developments, across Central London, that are scheduled for practical completion in the second half of next year. This re-balancing has clearly been accelerated by the result of the Brexit vote.
Ultimately, the combined outcome of these key factors will have a knock-on effect on supply and demand, and subsequently on how competitive landlords will need to become in order to secure tenants. For example, we have identified 3 – 3.5m square feet of new office space being completed in the City and Eastern City Fringes over the next 18 months. Whilst the dynamic of the City has historically functioned around Financial services companies, we are now seeing an increase in transactions from sectors such as technology, media and design taking up residence in traditional banking heartlands. With this geographic shift East for traditionally West-End based businesses, we are ideally placed to negotiate well incentivised and advantageous lease terms. We are anticipating that the next 6-12 months will be prime for occupiers, and a period of quick re-adjustment for landlords.
Brexit has brought many challenges, but one unexpected side effect is the creation of a tenant friendly market overnight.
This news was brought to you by Morgan Pryce, a specialist tenant acquisition agent with offices in Oxford Circus and the City. Morgan Pryce specialises in search, negotiation and project management and works exclusively for tenants.