London office values will fall by 38% and rents will almost halve, according to Citi.
Aaron Guy, a real estate analyst at the investment bank, said the falls would take place over the next two or three years, “driven primarily by likely recessionary impacts on higher unemployment and continued work-from-home office shrinkage”.
Citi believes the chance for the UK to “avert a deep recession has passed”, which is likely to take its toll on companies’ health. It forecasts that vacancy rates in London offices will double to around 11% as firms shed staff. “Based on the historic inverse correlation between rents and vacancy rates, we estimate a fall in London office rents of around 43%,” Guy said, over the next four years, followed by a 32% recovery in the following decade.
That would need prices to come down by more than 40% below current market values to make an “investible return” for someone buying it today.
The prediction is starker than most. Capital Economics recently predicted a fall of 15% by 2025.
