Here’s another reason to cast a covetous eye at the runaway West End office market: every single new letting this year has been secured at a higher rent. It’s an impressive statistic but, as ever, doesn’t paint a complete picture of the UK lettings market.
First the good news. New commercial property lease lengths are at a six-year high, according to IPD.
A combination of factors has caused the uplift: the recovering health of UK plc, tenants staying put and landlords being more accommodating. While the first is unequivocally good news – income lost through insolvencies has fallen to 4.7%, the lowest since 2010 – the latter two factors are more mixed.
As much as many property owners are exhibiting good sense in tenant relations, it is fear of empty properties that is forcing many to be more accommodating. And while tenant retention is a good thing, it perhaps suggests that occupiers aren’t outgrowing their space quite as much as economists would like.
Equally, while rental values are rising, landlords are still having to offer considerable incentives to tenants: rent-free periods have lengthened to 10.1 months on average, up from 5.7 months.
It won’t be lost on many landlords that however welcome this recovery in surety and security, it is no structural shift. Lease lengths have been contracting for two decades and, realistically, the best that can be hoped for is that they have found their floor.
Tech businesses are the poster children of this fleet-of-foot generation of occupiers. But even less techie tenants are behaving more like their always-on peers, opting for the sort of buildings that their employees want to work in. And if employees want to be fleet-of-foot, employers have to be too.
From an impressive statistic to a frightening one: almost one in five people working in property believes he or she has been discriminated against. Gender, age and race are the most common grounds, according to the 1,300 of you who responded to the latest EG/Cobalt Recruitment Salary Survey. Good progress has been made in the past 18 months in addressing the industry’s pale, male and stale reputation (from CBRE’s apprentice scheme to Deloitte’s efforts to present itself as a gay-friendly employer), but with 17% believing they have been disadvantaged unfairly, it’s clear how far there is to go.
A week on from UGL’s sale of DTZ to private equity house TPG, chief executive Tod Lickerman has fired his first warning shots at the rest of the industry, with particular aim taken at global giants JLL and CBRE.
Further acquisitions are already being discussed, reports the Wall Street Journal. “When we look at the industry around the world, we see a lot of high-quality companies that are private,” says the DTZ chief executive. “They would be much stronger inside DTZ than on their own and those companies are calling us now.”
And he hints that the UK will be a priority: “If you look at the major markets, anywhere we are not in the top three will get our attention.”
So, first salvo fired. Lickerman and his colleagues will already be reloading.
Norway may be a country of just five million people but it runs the world’s largest sovereign wealth fund. It is, of course, the invested proceeds of the country’s North Sea oil wealth. “What if?” the UK should ask itself.
But let’s not worry about a past that we cannot undo. Let’s focus instead on the present, or rather, the future.
The chancellor is expected to use his autumn statement next month to unveil a sovereign wealth fund that would invest the tax proceeds of the £1tn fracking boom. Focusing the fund at least initially on the north of England, where shale gas reserves are concentrated, would not only be just, it would add fuel to the fire of George Osborne’s burning ambition to create a northern powerhouse.
