The central London office market proved resilient in the face of the global slowdown in the first half of 2001, according to Insignia Richard Ellis’ (IRE) latest research.
IRE’s Central London Office Market Outlook shows that office take-up in central London over the first six months of 2001 totalled 761,780 sq m (8.2m sq ft), down 9% on the same period in 2000.
Preletting remained strong, at 44% of the total in the first half, with further major deals in the third quarter to date at Paternoster in the City, Paddington and Canary Wharf. Second-hand office availability has risen sharply this year, but ready-to-occupy new supply remains limited.
The overall vacancy rate was only 3% at the mid-year point, with just 408,760 sq m (4.4m sq ft) of available floorspace under construction.
Prime office rents in the City this year have continued to rise and the top rental norm in the West End has stayed above £861 per sq m (£80 per sq ft).
Research director Peter Damesick said that it was too early to know what effects the US terrorist attacks would have on the market: “Before the attacks our expectation was a further easing in office demand in central London, reducing total take-up to around 11m sq ft in 2002, and a continued rise in second-hand supply, with rental growth effectively stalling in the short term,” Damesick said.
Damesick added: “Development is restrained so new supply will continue to be modest and we anticipated an improved letting market by 2003.
“The risks of a deeper economic downturn have now increased, although a serious recession is not inevitable. As a partial offset to the consequences of the damage in New York, activity in London’s international financial services may need to be increased, temporarily at least.
“Some US companies may choose to increase operational levels in London. It is unclear at this point to what extent this may generate some requirements for office space in London.
“However, more important will be how far business investment and world economic activity are weakened and for how long in reaction to this atrocity and its aftershocks.”
EGi News 24/09/01
