COMMENT Given the inchoate nature of this situation, last week was a period of assimilation for London offices, with a simple acclimatisation for many to a new way of working for the medium term.
There is still some activity and the indications are that the larger transactions are proving to be more resilient than the smaller ones, presumably led by the acute supply shortage that pre-dates the current state of affairs.
We are monitoring all live deals over 20,000 sq ft across London where we have reasonable visibility. It is likely to be a highly protean market, with activity occurring in fits and starts as we work through this temporary setback.
A key concern raised a number of times last week was the presumed disruption to the supply chain for construction and the closure of construction sites during the period of containment. This could have significant implications, both for the wider marketplace in terms of an even more acute constraint to the pipeline, and specific instances where a successful preletting is contingent upon the timely delivery of the space in question. Our Italian colleagues, where the situation is more advanced, report that this has become a significant factor in their world.
Flexible offices
Flexible workspace operators are likely to face significant headwinds in the coming weeks, given that working from home and social distancing run counter to the very essence of their offer, although the disruptions to delivery of schemes may become a positive factor for them as occupiers need short-term solutions to tide them over before they can start fitting out their long-term space.
Another source of potential optimism for this sector is the increased demand for disaster recovery/emergency space, where teams can be split across two sites to substantively reduce the risk of contagion.
When will things improve?
Any forecast as to the timing and outcome of the current state of affairs may well not stand the test of time. However, this is a highly unusual situation in that, in previous global downturns, there has been no tangible visibility of when things might change, and there could only be an a priori set of loose assumptions. In this instance, though, the general weltschmerz is tempered by the early signs of a return to normality in the countries where the outbreak originated, which gives a glimmer of hope and an ability to make some tentative assumptions about when circumstances will improve.
When the improvement starts, it is our view that activity will resume rapidly, in a market where logic suggests there could be an even greater limitation to future supply. It will be important to be ready for this – for example, when things start to get back to normal, the first viewings and inspections may be virtual. It is highly important therefore that this experience must be available and easy to access and use as it becomes the link to a resumption of the status quo.
Richard Howard is head of London leasing at Cushman & Wakefield
