The chief executive of South East offices investor McKay Securities has compared pent-up post-pandemic demand in the occupier market to the aftermath of the global financial crisis.
“There is a feeling a little bit like it was coming out of the GFC, where there was deferral while people waited to see how the land lies,” Simon Perkins said of demand for office space, arguing that appetite has been “deferred rather than lost”.
Perkins said the REIT’s letting agencies point to demand being roughly 30% down on pre-pandemic levels. “But there is definitely a feeling of an increase in viewings and a pick-up of some of the requirements that had been sitting latent for a little while,” he added. “They are beginning to feel there is life coming back, particularly in the last month.”
McKay owns a portfolio of offices in London and the South East valued at £291.6m. That valuation has dropped by almost 12%, or £34m, over the past year, but still accounts for two-thirds of the group’s portfolio, which also includes some logistics and leisure assets.
Existing tenants are keen to return to the workplace, Perkins said. “The general feeling is there is a desire to get back into the office,” he said. “The way in which they return will depend very much on the size, scale and nature of the operation. There is not going to be one size fits all. But there will be a formalising of a more hybrid pattern of working.”
The chief executive added that there would be a “flight to quality” as occupiers make fresh decisions about new leases. “If you are going to move, why would you want to move to a tired building? Environmental characteristics and ESG factors are going to be key. People are going to want easy access, safe buildings and attractive spaces to be able to attract and retain their workforce.”
Perkins spoke with EG as McKay announced its full-year results for the 12 months to 31 March. The REIT posted an adjusted profit – excluding one-off factors – of almost £10m, up by 2.4% year-on-year.
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