Demand for office space in central London is rising, while retailers are focusing on “fewer, but bigger and better” shop locations, according to commercial property giant Land Securities (Landsec).
The property market appears to be gaining momentum post-pandemic, with activity in the capital picking up pace.
Landsec reported a pre-tax profit of £243 million for the six months ending in September, a significant turnaround from the £193 million loss recorded in the same period last year. Meanwhile, the value of its property portfolio held steady at £9.96 billion.
The rising demand for modern workspaces
The use of office space in central London continues to grow, with businesses increasingly seeking modern, sustainable environments. According to Landsec, its clients are planning for more space per worker compared to five years ago, reflecting a shift in workplace dynamics.
Retailers, too, are adopting a more strategic approach. Landsec noted a trend towards fewer stores, but ones that are larger and situated in prime locations. This shift has led to store expansions and refurbishments for major brands such as Primark and JD Sports.
Rents in both office and retail sectors continue to rise, driven by a shortage of available space and heightened competition among investors.
Landsec’s diverse portfolio includes key office spaces and retail destinations such as the White Rose shopping centre in Leeds, the O2 Centre in London, and the Bluewater shopping centre in Kent.
Political stability and economic challenges
Mark Allan, Landsec’s chief executive, highlighted the impact of political and economic factors on the property market.
“Whilst global geopolitical uncertainty has increased, for the UK, the general election over the summer has created an element of political stability that has eluded the country for nearly a decade, ever since the EU referendum,” he said.
However, Mr Allan cautioned against the potential impact of rising taxes on business decision-making. “Whilst political decisions always require an element of compromise, we are mindful of the risk that the cost of increased taxes could slow down business decision-making.”
Despite these concerns, Mr Allan praised the Government’s ambitions for economic growth, expressing optimism about plans to unlock urban residential development, which could further bolster the market.
Concerns over rising costs
These comments come amid warnings from retailers and hospitality groups about looming cost increases following measures announced in the Government’s autumn Budget. Key changes include a planned hike in employer national insurance rates and an increase in the national minimum wage from April.
While the property market shows resilience and signs of recovery, the combined pressures of rising costs and taxes may weigh on future decision-making for businesses across sectors.