Office real estate, along with logistics and retail, is a subsector of the commercial non-residential property sector. The office real estate market includes any investment into the subsector, such as new construction and developments, refurbishments, reselling and leases. Multiple factors can play a role in the decision to choose a city for investment and development, some of which are transport connectivity, forecasted real estate returns, a city’s economic performance, availability of assets/opportunities for new development, market size and liquidity, regulatory environment, digital connectivity, attractiveness to talent, city leadership, housing affordability, and affordability of space for new/small/growing businesses.
As of the beginning of 2020, Central London was one of the three top destinations for office real estate investment along with Paris and Germany's four largest cities Berlin, Hamburg, Munich, and Frankfurt, attracting investment worth approximately 4.4 billion euros. Due to the effects of the coronavirus (COVID-19) pandemic and Brexit, investments have significantly decreased during the first three quarters of 2020. Leasing activity has also been impacted with take-up of office space declining and prime office vacancy rates on the rise. Nevertheless, vacancy rates in certain Central London areas remain below the long-term average, showing that demand for office space has not ceased. At approximately 1.34 thousand euros per square meter as of the third quarter of 2020, Central London annual rental costs top the ranking of leading European cities.
