News

City gloom sparks space withdrawal

News

Estates Gazette

25 August 1990

by Denis Hall

The 4.3-acre chunk of the 7-acre Paternoster Square, EC4, owned by Greycoat, Park Tower Realty and Mitsubishi Estate, has become the latest casualty of the city office market downturn. Agents Jones Lang Wootton have been told to abandon attempts to dispose of short leases on 178,000 sq ft of space in Laud House, Walden House and Grindal House. All have landlords’ options to break in 1991 or 1992.

Greycoat’s Geoffrey Wilson dismisses suggestions that the decision has any dramatic implications. “It’s no big deal,” he says, “and does not affect our plans for the redevelopment of Paternoster Square either way.”

The consortium joins a continuing number of landlords who, faced with a City office sector swamped by the highest levels of available space for five years, are withdrawing their properties.

According to Richard Saunders & Partners’ Malcolm Trice, this trend is becoming an increasingly prominent feature of the City lettings scene.

“More and more landlords are deciding that there is no point spending money on updating space within older buildings for short-term lettings in a market like this,” he says.

“It’s cheaper to leave it vacant for eventual redevelopment. There is not enough pressure in the market to force tenants to take short-term leases on outdated property; they can go elsewhere.”

The Paternoster decision highlights the continuing fall in the City’s fortunes after improved take-up in June had raised hopes that the market was about to turn.

But the doubling of take-up in the City from RS&P’s May figure of 175,364 sq ft to 393,641 sq ft in June was followed in July by a fall to 227,125 sq ft. These figures pale against the 9m sq ft of space which RS&P report as still available across the City — three times the 1985 figure.

The firm’s latest City survey does not give out any hope for the letting prospects of the latest additions to the market. “The phrase ‘secondhand’ does not necessarily imply poor quality,” they say. “But the space may still prove more difficult to dispose of with approaching rent reviews, relatively high historic rents and less than 25-year lease terms.”

The problem, argues Trice, lies with supply rather than demand. “There is a respectable amount of demand waiting in the wings to take advantage of deals being offered on space where pressure is growing to get rid of it. But the sort of vacancy levels we are currently witnessing are going to continue at least until 1992.”

by Denis Hall The 4.3-acre chunk of the 7-acre Paternoster Square, EC4, owned by Greycoat, Park Tower Realty and Mitsubishi Estate, has become the latest casualty of the city office market downturn. Agents Jones Lang Wootton have been told to abandon attempts to dispose of short leases on 178,000 sq ft of space in Laud House, Walden House and Grindal House. All have landlords’ options to break in 1991 or 1992. Greycoat’s Geoffrey Wilson dismisses suggestions that the decision has any dramatic implications. “It’s no big deal,” he says, “and does not affect our plans for the redevelopment of Paternoster Square either way.” The consortium joins a continuing number of landlords who, faced with a City office sector swamped by the highest levels of available space for five years, are withdrawing their properties. According to Richard Saunders & Partners’ Malcolm Trice, this trend is becoming an increasingly prominent feature of the City lettings scene. “More and more landlords are deciding that there is no point spending money on updating space within older buildings for short-term lettings in a market like this,” he says. “It’s cheaper to leave it vacant for eventual redevelopment. There is not enough pressure in the market to force tenants to take short-term leases on outdated property; they can go elsewhere.” The Paternoster decision highlights the continuing fall in the City’s fortunes after improved take-up in June had raised hopes that the market was about to turn. But the doubling of take-up in the City from RS&P’s May figure of 175,364 sq ft to 393,641 sq ft in June was followed in July by a fall to 227,125 sq ft. These figures pale against the 9m sq ft of space which RS&P report as still available across the City — three times the 1985 figure. The firm’s latest City survey does not give out any hope for the letting prospects of the latest additions to the market. “The phrase ‘secondhand’ does not necessarily imply poor quality,” they say. “But the space may still prove more difficult to dispose of with approaching rent reviews, relatively high historic rents and less than 25-year lease terms.” The problem, argues Trice, lies with supply rather than demand. “There is a respectable amount of demand waiting in the wings to take advantage of deals being offered on space where pressure is growing to get rid of it. But the sort of vacancy levels we are currently witnessing are going to continue at least until 1992.”