Only 2m sq ft of offices taken up in 2002 – and 18% vacancy rates loom
Adam Coffer
Take-up of office space in the City of London has hit its lowest level since records began, according to Jones Lang LaSalle.
The agent’s latest research into the central London office market, due to be published next week, shows that take-up of completed space in the City over 2002 totalled just 2m sq ft – the lowest since it began researching the market in 1984.
Total take-up of City space – including uncompleted space – was just 1.1m sq ft in Q4 2002, taking the total for the year to 3.25m sq ft, “a similar level to that seen at the bottom of the last cycle in 1991 and 1992”, according to JLL.
Supply grew by 5% in Q4 to 8.25m sq ft, representing a vacancy rate of over 10%.
Martin Wallace, head of City agency at JLL, said that with 3.4m sq ft of speculative development due for delivery this year and secondhand space continuing to hit the market, the vacancy rate would rise to up to 18% by the end of the year before the market began to recover in late 2004/2005.
“Occupiers control around 70% of available space in the City,” he said. “If the banks were the accidental landlords of the 1990s, the occupiers are those of the 2000s.”
Wallace would not comment on JLL’s planned redundancies (see Finance, p39) but said he anticipated a wave of redundancies throughout City agencies.
2003 Forecast, p45
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West End tenants start to sniff out good deals |
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In the West End, take-up was also at its lowest for 10 years, at 2.5m sq ft, 20% of which were lettings to government bodies. Prime rents remain in the high £60s per sq ft but incentives have moved out further, with JLL citing 12-month rent-free periods for 10-year leases. But JLL’s head of West End agency, Phillip Howells, said a limited amount of supply due for 2003 had led to “an increase in interest for grade A space, with companies realising that now might be a good time to sign up for deals”. Investment turnover in Q4 was £679m, bringing the total for the year to £2.81bn – a similar level to the three previous years. But JLL’s Julian Stocks said: “Yields will continue to be hot for anything long-let to good covenants but I would predict good opportunities to buy at the end of 2003/early 2004.” |
