Global Drive and Demand for Premium Office Space
The pandemic was a challenging time for the commercial property sector around the world, but as the work from home trend starts to lose steam companies are returning to commercial premises with a vengeance. Vacancies are dropping in cities from London to Hong Kong and Cape Town is showing similar signs of returning to the office for good.
The office exodus of 2020 and the slow pace of construction and renovations in 2021 has created a global shortage of premium office space just as businesses are keen to return to sought-after buildings. Let’s take a closer look at what’s happening in property markets around the world as well as in Cape Town and examine the vacancy projections for premium office space over the next few years.
Major trends in the premium office space around the world
Having the right address has always been important in business and despite the spike in working from home that we witnessed during the pandemic, the old “location, location, location” principle in real estate seems to be making a comeback.
Premium office space is in big demand around the world as corporations reopen and businesses scale down their work from home policies or even cancel them altogether.
Premium office space shortage expected in London from 2023
One of the cities that was worst affected by the pandemic shutdown was London, where companies switched over to remote working in large numbers and parts of the British capital’s famous business districts began to resemble ghost towns in late 2020.
Fast forward two years and the situation has made a complete about-turn. In fact, it’s now projected that demand for premium office space will exceed supply in 2023 and beyond, sparking a wave of new property investments in the Grade A sector.
Asia Pacific follows suit with a spike in demand
The Asia-Pacific region saw some of the strictest COVID era lockdowns and movement restrictions as governments in densely populated eastern cities battled to keep the virus under control. It’s not hard to imagine what kind of effect these measures had on the commercial property sector in cities like Hong Kong and Singapore, which saw millions of workers suddenly restricting their own movements or staying home in compliance with government regulations.
Fortunately, as the pandemic has waned in Pacific nations, a huge return to the office has been noted in the powerhouse capitals like Hong Kong and Singapore where demand for premium office space is accelerating.
Rentals move up, tracking demand
As more businesses return to premium commercial spaces, rentals are showing an upward trend for the first time since the pandemic began. Like the demand trend outlined above, this movement is being observed in property markets around the world.
- Grade A office space in Singapore is set to rise 9% in 2022, cooling slightly to 5% in 2023. High tenant demand and limited supply in the island nation is driving prices ever higher.
- London office space in the premium category is expected to increase by more than 6% in price in the rental market.
Closer to home, the latest data from the third quarter of 2022 shows grade-A nominal rentals increasing by 7.6% in Cape Town year on year.
Overall, the vacancy levels and increases in commercial property rents around the world points to a new wave of business confidence. These positive changes are being mirrored in the Cape Town property market as the economy expands in the post-pandemic era with tourists returning and foreign investment in the city set to increase in the years to come.
For businesses in the Mother City, the ideal time to secure a premium office space before demand explodes could be right now.
The factors behind a new demand for premium office space
Global trends in real estate are converging as tenants in business locations around the world respond to the post-pandemic era in a similar way. Here are some of the top reasons companies in cities as far apart as Hong Kong and Cape Town are opting for premium office space in 2022 and beyond.
Attracting workers back to the office
Old habits die hard, and so do recent ones. The remote working trend that accelerated during the pandemic has caused a major shift in the way that employees choose to work. However, companies have begun to scale down or suspend their remote working policies and premium office space is a strong incentive for employees to return to the office in comfortable surroundings with a hint of prestige.
Talent acquisition
If getting existing workers back to the office has its challenges, attracting new employees with specialised skill sets can be even more difficult, especially when remote working and freelance consulting has become so popular.
Companies in search of the best talent will naturally require the new members to be at the office at least some of the time, and the business environment created by Grade A office space is likely to be in line with the general lifestyle and expectations of highly skilled and well-paid professionals.
Complying with environmental sustainability standards
Sustainability goals are a major focus for governments around the world, especially in developed markets and companies are keen to show their commitment to a greener future by investing in office space that has a small carbon footprint.
Given that most Grade A premises are recently built, they’re more likely to comply fully with environmental best practices. Investing in this type of premises can give companies a boost in the eyes of potential clients as sustainability has become the new cool in cities around the world.
Encouraging a culture of wellness
The pandemic has served as a strong reminder that the most important things in life – like good health and happiness – aren’t always easy to measure using numbers alone. Premium office spaces are often located in buildings with organic food restaurants, wellness facilities like gyms, and even childcare facilities, so that working parents can be productive while their children are taken care of right in the same building.
All of these factors make premium office space extremely attractive to companies at a time when the triple bottom line has extended to personal happiness and well-being.
Engaging with clients
One of the biggest changes that our business culture underwent during the pandemic was the sudden disappearance of in-person meetings, and for the majority of businesses getting back to the meeting table across from clients is a major priority.
Premium office space provides a comfortable environment for in-person meetings while maintaining a level of professionalism that simply isn’t possible using Zoom or other virtual meeting systems. Since new clients are often the lifeblood of every business, the ability to meet face-to-face and get things done in a conducive environment is a huge strategic advantage for any business.
Increased productivity
Ultimately, worker productivity makes the biggest difference to the success or failure of any venture. The environment in which workers do their work has a huge impact on the quality of the final product, especially when employees have gotten used to working in the comfort of their homes. Premium office space provides that same comfort while also adding a level of professionalism and structure that many workers have been missing.
Finding Premium Office Space
As businesses show renewed confidence and sign long-term leases again, finding a modern, stylish office space is going to become tricky in the years to come. The Commercial Space team has helped numerous dynamic companies to secure new premises recently, and we would love to do the same for you. To view one of the office premises in our extensive portfolio, contact us today.
