Friday property news update - 3 September
Tenants' markets, the green buildings premium and how much would you pay to live near an outstanding school?
3 minutes to read
The office
What was a torrent of stories about large companies and their changing working habits has slowed to a trickle. Google's announcement that it would delay its big return to the office received a lot of attention earlier this week, but that makes it an outlier.
The shift in interest reflects the change in the narrative, which has moved from a great reset to something more nuanced. That KPMG survey of 1,300 global CEOs published earlier this week found that 21% of leaders expect to cut their office footprint, down from 69% as recently as August. Just 14% of UK CEOs plan to downsize.
Still, 21% is not nothing and it is unquestionably a tenants' market out there. Lee Elliott's latest quarterly report on global occupier markets reveals that 73% of the 93 markets the team tracks are reporting tenant-friendly conditions. That figure moves up to 83% in the Americas.
Office markets will become more balanced in 2022 as occupier demand continues to strengthen and shortages of best-in-class offices become more acute, according to Lee. Indeed, the number of tenant favourable markets will fall from 68 to 60 next year, due to a shift across markets in the Americas, Europe and APAC.
The 'E' in ESG
In most global office markets 'best-in-class' is now synonymous with 'green' buildings, but until now it's been unclear quite how much of a premium occupiers place on the environmental credentials of the building they occupy.
Knight Frank has collaborated with BRE, the creators of BREEAM, to quantify the impact of BREEAM ratings on prime central London office rents. The report is made possible by combining BREEAM ratings with Knight Frank data covering transaction activity over the last decade for more than 2,700 central London office buildings.
The report finds that Very Good, Excellent and Outstanding BREEAM ratings have a significant impact on rents, with premiums ranging from 3.7% to 12.3%. See this link for more.
Political headwinds
The return to the office is quickly becoming a difficult issue for the Prime Minister. Back in March Boris Johnson suggested workers have "had quite a few days off" before leaving work from home advice in place for four more months. The PM will chair his first in-person cabinet meeting next week amid uncertainty as to when civil servants will be called back.
It is one of several tricky property-related issues the government will seek to navigate over coming weeks. Supporting town centres and retail, net zero and the continued absence of the long-promised strategy to deal with emissions from housing are all looming large.
In an attempt to glean some insights as to what's happening behind the scenes in government, Anna Ward speaks to Andrew Smith, head of public affairs at Weber Shandwick. During a new episode of Intelligence Talks they cover competing interests in our city centres, the review of business rates and support for online taxes, plus who is going to pick up the bill as the government departs from fossil fuels to heat homes. Listen here, or wherever you get your podcasts.
Schools
With pupils returning to schools this week for the new academic term, the value of education and the premiums families are willing to pay to secure access to top-rated primary schools are back in focus.
New analysis from Chris Druce finds properties close to primary schools rated ‘outstanding’ sell for an average of 11% more than homes located further away. The North East has the biggest premium this year at 18%.
The East Midlands, which topped the list last year, has an average premium of 17% and is second in the list, while the South West and Yorkshire and the Humber were tied in joint third with 15%.
In other news...
Barratt's order book hits £4 billion, why demolish buildings when you can deconstruct, what next for the rich, housing for all in Ireland, UK employers keep up the hunt, and finally, how wealthy Americans are dealing with Biden's tax plans.