London office vacancy rates are expected to rise by the end of the year, in another blow for the health of the capital’s commercial property market.
All corporate hot spots are expected to see a rise in empty lots, with vacancy rates expected to hit 12.1 per cent in the City by the end of this year, up from 10.8 per cent recorded in 2023, figures from CoStar show.
In London Docklands – which includes Canary Wharf – vacancy rates are expected to hit 16.6 per cent in the fourth quarter of 2024 up from 15 per cent in the same period last year.
The east-London banking district was dealt a blow last year when HSBC announced it would not renew its lease which expires in 2027 at its landmark tower in the region.
However, the 656 ft building is set to be repurposed with questions remaining about whether it will continue to be used for office space.
In the capital’s West End, vacancy rates are forecast to rise from 7.2 per cent to 9.7 per cent.
Offices around the shopping and entertainment strip have benefited from a more diverse occupier mix.
A note published by Jefferies towards the end of last year said that London office vaccines were at a 30 year high.
Higher rents and a demand for better flexibility from occupiers has squeezed the sector drastically since the pandemic fuelled home working push.
This coupled with fears about the future of London’s biggest tenant Wework has left many worried about the state of the commercial sector.
Before Christmas the trendy workplace provider filed for Chapter 11 bankruptcy in the US after it racked up $3bn (£2.36bn) in debt.
It is now understood to be in talks to exit The Cursitor, a site in Holborn and the site is no longer listed on its website.
This follows the closure of three sites in Shoreditch and one in Blackfriars.
However, James Proctor, director and head of central London offices at Hartnell Taylor Cook, said the capital is currently in a period of “transition”.
“It’s true that the pandemic has led to an unexpected revolution in the way that we work, but London is not seeing a mass exodus from the office. We are in a period of transition that has sustained activity levels in the market.
“Reading between gloomy headlines, it becomes clear that there remains lots to be optimistic about. In the face of hybrid working, employers are embracing higher quality office space to entice employees into the office and the flight to quality is currently fuelling the market, with the total space occupied by tenants increasing.
He added: “With the demand for Grade A space higher than ever before, landlords are working hard to upgrade the quality of their portfolios, making London’s office market trajectory over the next few years an exciting one to watch.”
City A.M has contacted Wework for a comment.