COMMENT Every year seems to introduce a new buzzword to our industry. If “Crossrail” was the agent’s catchphrase of 2022, “best in class” must be a frontrunner for 2023.
Buildings in core locations that feature excellent ESG credentials, and an elevated level of tenant amenities, continued to lease up strongly throughout the year. Rents for buildings in the West End, especially in prime locations of Mayfair and St James’s, have gone from strength to strength. At the beginning of the year, Mayfair rents of £150 per sq ft were still seen as a record; today, this has become the standard for best-in-class space, with new records being set nearly every week, already pushing through the £200 per sq ft ceiling.
The revenge of the tenant continues to drive the flex and serviced office sectors forward as occupiers demand more than merely quiet enjoyment from their landlords.
Despite the demise of WeWork, 2023 has seen significant consolidation in the sector, as well as the emergence of a plethora of new operators. Nearly every major office REIT, property company or London estate has added managed office capabilities to their offering, making the “hotelisation” of the office world another contender for the most-used term of 2023.
“Refurb first” should also make the list. The much-debated decision surrounding the future of the M&S store on Oxford Street has put the spotlight on the already hot topic of refurbishment versus demolition and new build.
On the financial side, both “cost inflation” and “interest rates” deserve a nomination. While tender price inflation eased off towards the end of 2023, overall, the cost of development went up by more than 30% since 2020. Interest rates had already started to rise in 2022, but they kept going up throughout 2023, where they also started to bite.
So, the shortlist for “UK Real Estate Term of the Year 2023” is:
- Best in class
- Hotelisation of offices
- Refurb first
- Cost inflation
- Interest rates
- Stranded assets
Sascha Lewin is chief executive at W.RE
