Office supply in the UK’s business hubs has fallen by 35% since 2009, according to Savills.
The agent said that although the fall has been primarily caused by limited development activity, conversion of poor-quality offices to new uses has also played a role.
The agency estimates that 14.4m sq ft of office space has been converted to residential uses since 2015. That figure is 37.9m sq ft of office-to-housing across the rest of the country.
Office-to-residential conversions have been the main source of new dwellings under permitted development rights, accounting for 89% of total conversions in this time period, researchers added.
The undersupply of space has meant that the vacancy rate for regional offices remains historically low at 11%, up by about 1% as a result of the pandemic.
As a result, the risk of downward pressure on rents has lessened since 2009, the agency said. Several regional markets even saw prime rental growth during 2020, despite the pandemic. In Manchester, top rents increased to £38.50 per sq ft in the first quarter of 2021, up from £37.50 per sq ft at the end of last year.
Richard Merryweather, joint head of UK investment at Savills, said: “The low vacancy levels and very limited new development in core markets continues to attract a broad range of domestic and overseas investors.
“Prime yields in the key regional cities have held firm and value add investors are looking to take advantage of the very limited development pipeline.”
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