It would be easy to have a gloomy outlook in London at the moment.
BNP Paribas Real Estate is reporting that office occupier take-up in the capital during 2016 was down by 19% compared with the previous year, CBRE says that investment in London was £3bn lower than in 2015 and the serving of Article 50 and Trump’s protectionist policies are likely to cause further uncertainty over the coming months.
Those of us old enough to have been around in 1979 may remember Ian Dury and the Blockheads scaling the charts with Reasons to be Cheerful, Part 3.
So here’s the positive news: a recent report from Savills showed that total take-up in Greater London and the South East during 2016 was still 6% above the long-term average, which is an impressive sign of resilience under the circumstances.
And despite the EU referendum vote - and the charm offensive that Paris launched last week to try to attract businesses across the Channel as a result of Brexit - our capital remains unrivalled as a global city, particularly within Europe.
Berlin might have creativity, Frankfurt might be a hub for business and finance, Brussels might be the home of the European Parliament and Paris might have strong academic institutions, but none offer the complete package or have the scale that London does.
The occupier market last year was more than ever before driven by TMT companies, attracted by London’s international outlook, vibrancy, talent pool, legal and tax environment, language advantage and position at the centre of global time zones. In its Q4 Central London Office Market Report, JLL recorded more active demand from TMT occupiers across all areas of London than from firms in any other sector.
Long-term commitments
Huge global tech brands such as Apple, Facebook, Snapchat, Google and Skyscanner made long-term commitments to London regardless of its uncertain relationship with Europe.
The locations of these lettings highlight London’s dynamism and constant reinvention: by choosing Battersea, Apple demonstrated its confidence in a new creative district emerging on the South Bank; Google’s commitment to King’s Cross is testament to the transformation of a once insalubrious area; and Facebook, Candy Crush-owner King, Skyscanner and McKinsey all taking space around Tottenham Court Road shows how the world’s biggest TMT and business service brands are recognising that the arrival of Crossrail, the revamped Centre Point and the West End Project are set to make this area the new centre of the West End.
Just as tech firms and the service and creative industries are showing sustained confidence in London, property and construction needs to do the same: we must continue to develop world-class office buildings to match the expectations of the planet’s most exciting businesses.
Britain has spent more than seven months obsessed by all things Brexit. But long before joining Europe in 1973, the UK was outward looking and internationally focused and London was a major business centre. Thinking optimistically, it might become an even more attractive place to do business outside the shackles of the EU.
Major international companies used to working across multiple jurisdictions will not let Brexit detract from London’s appeal on the world stage.
One tangible effect post Brexit on the London office market is the supply pipeline with few new starts in 2016 and little prospect of this picking up in 2017. With long-term demand holding firm, fast-forward to 2019. Might landlords and developers see Reasons to be Cheerful, Part 4?
Peter Ferrari is Chief Executive at AshbyCapital.