Agent expresses concern at “rampant investment” as take-up slumps
Robert Gibson
The investment market in central London is operating “irrationally”, says Jones Lang LaSalle.
The firm’s latest research for the second quarter of 2002, to be published next week, shows that take-up is still at a near record low in both the City and West End but that investment is booming.
JLL’s City investment director, Chris Northam, said: “It is a very quiet occupier market but there is a rampant investment market. The sheer weight of money looking to invest in property is causing yields to harden. However, the occupancy market is shaky. This is not rational.”
Take-up in the West End was 662,000 sq ft, up less than 1% from the record low for the cycle in Q1. The figure was driven by a handful of bigger deals, such as Lazards’ 140,000 sq ft at Mayfair Place, W1, and WS Atkins’ deal for 92,000 sq ft at Euston Tower, NW1.
In the City, JLL says take-up was up to 710,000 sq ft from 603,000 sq ft last quarter. According to JLL, investment turnover in the West End during Q2 totalled £900m compared with £242m in quarter one. By far the largest transaction was Rotch’s £327m purchase of Shell Mex House, WC2, which reflected an initial yield of 6.9%.
In the City, £1.32bn of property changed hands compared with £383m in Q1.
Knight Frank’s figures for the same period paint a different picture to JLL’s findings. KF says that West End and Midtown take-up was double JLL’s figure at 1.2m sq ft – up 41.6% from Q1.
Head of KF’s central London research, Sarah Bate, said: “Although this is a healthy improvement on Q1 – with low volumes of requirement – prospects for the year remain conservative.
Knight Frank’s central London research shows that prime rental levels have fallen from their peak in 2000 of over £90 per sq ft to £75 per sq ft, as demonstrated by the Lazards deal.
