UK office and retail vacancies rising at record pace

Vacant office and retail space in the United Kingdom is rising at a pace not seen since at least 1999, when the metrics were first kept.

The coronavirus has devastated the two sectors. The number of brokers reporting rising vacancies is the highest since the Great Recession, according to Bloomberg, citing a survey by the Royal Institution of Chartered Surveyors.

Around 73 percent of respondents said they see retail vacancies rising, while 54 percent said they see office space emptying. Conversely, about seven in 10 said they see demand rising for industrial space and expect those rents to rise.

That’s in line with trends in the U.S., especially in major cities like New York and Los Angeles. Manhattan retail rents sunk to a record low in the fall and office leasing tanked.

New deliveries of retail and office space could be contributing to rising vacancy rates in the U.K., but some tenants are simply vacating. London-based serviced-office provider Workspace Group reported that 18 percent of its space was vacant at the end of 2020, up from 10 percent in late June.

Giles Hall, an asset manager at Orchard Street Investment Management, said that government intervention has staved off some of the pain.

“As the support and protection from debt recovery unwinds, I expect office and retail rents and values to fall further, unfortunately, as the full extent of tenant distress becomes clear,” he said.

[Bloomberg] — Dennis Lynch