Take-up of London office space has plummeted in the first quarter of 2001.
According to the London Office Database, 463,000 sq m (4.9m sq ft) was let in the first quarter of this year, a fall of 17% on the last quarter of 2000.
The figures from LOD, a sister company to Estates Gazette, were revealed at an event organised by LOD in London last Friday. Market forecaster Malcolm White told the audience of 120 that the industry was experiencing a “demand-led slowdown”.
White, of Barber White Property Economics, said that slackening demand for space would cut rental growth from around 19% in 2000 to 13% this year to 3.5% in 2002. But thanks to the current stability of the property market, “the slowdown will be nothing like it was in the late 1980s”.
Rupert Cherryman of Chesterton stressed that the outlook remained positive: “A drop from 19% to 3.5% is still growth. There was fantastic growth last year, but there is still demand now.”
According to LOD, take-up fell in all parts of central London, except the City fringe, which saw a 47% increase to 128,301 sq m (1.3m sq ft). The extra uptake on the fringe was mainly the result of two major lettings in SE1 where Jones Lang LaSalle and Knight Frank secured
Ernst & Young for More London Bridge and Chesterton acquired Sampson House, Hopton Street, for SEMA.
These results tie in with the Market Share League table also released by LOD.
Knight Franks Bradley Baker said: “The decrease in take-up comes as no surprise. Last year was a record year, reaching levels that no one had seen before. No one expected it to continue. Last year, the economy was strong and everyone was optimistic, so you had a lot of people taking large lets. This year lettings are down, and its because of nervousness over the economy.”
LODs figures also show a fall in prelets and space let during construction. In the first quarter of 2001, these came in at 144,000 sq m (1.5m sq ft), 43% down on the last quarter of 2000.
But Karen Sieracki of BH2 said that preletting was still strong in the City and City fringe: “Theres 6.04m sq ft of office space under construction in the area, and 60% of that is prelet. Its promising that a lot of companies are committing to take offices in two years time. The fourth quarter of 2000 was high anyway. We went out of the year with a bang so where could it go but down?”
But caution over the US economy has led to a 10% increase in secondhand take-up.
See this Saturday’s Estates Gazette for a fuller version of this article.
EGi News 25/05/01
