Commercial landlords were again in the property news this week, with rent collection rates for the June quarter reaching 69% for the sector as a whole (as compared with 70% at the same point for the previous quarter) according to figures published by Re-Leased. Office rents hit 74% collection at the same point, but this did represent a 5% fall from the same point following the March quarter.
There is room for potential optimism for some landlords, however. Office occupancy levels have, according to Metrikus' office occupancy index, been steadily rising to approach 70% plus as at the latter part of August. London certainly feels busier, undoubtedly as a result of many companies (Teacher Stern included) adopting 'return to the office' work patterns to a greater or lesser degree. September is seen as the litmus test here, as a significant proportion of offices are asking workers to spend at least some time working from office locations from the start of the month.
Coupled with occupation rates starting to rise (at least in part), agents are reporting a higher volume of new deals than has been the case throughout the pandemic. Cushman and Wakefield recently calculated 1.8 million square feet of office space was exchanged on during the March quarter of 2021, reflecting a 39% uplift versus the December '20 quarter and the highest quarter of office take-up since the pandemic began.
Similarly, Shaftesbury also recently reported a boost in West End footfall as (some) Londoners and staycation-ers made the most of lowered restrictions and a domestic summer (albeit not much sun). The figures are still only at 50-60% of their pre-pandemic levels but do represent some optimism that people are, at weekends at least, returning to take advantage of the West End's shopping and leisure offerings. Landlords will obviously be hoping that this trend continues into the winter months and into the pre-Christmas period.
The picture is not unanimously positive. The Centre for Cities' high streets recovery data to the end of July still put London as the most hard hit UK city in respect of high street footfall, reaching just 35% of pre-lockdown levels for the last week of July. As a counterpoint to the Metrikus data, the Centre for Cities found the footfall of London weekday workers to be only 15% of the equivalent pre-lockdown base. The fabled 'freedom day' obviously only impacted part-way through those figures and it may be that there has been room for optimism since.
Whatever 'new normality' the future holds, it is clear that things won't be quite the same as before. How employers and landlords alike react to and accommodate that new normal will undoubtedly be key to bringing people back to the City and (flexibly) some of their old working habits, but, for now at least, there does appear to be a little light at the end of the tunnel for London's commercial landlords.