Central London Office availability

Citation

(1998), "Central London Office availability", Property Management, Vol. 16 No. 1. https://doi.org/10.1108/pm.1998.11316aab.006

Central London Office availability

Central London Office availability

Availability of office space in Central London is at the lowest level for seven years, according to the latest figures from Hillier Parker. Total space being marketed has decreased by 12 per cent since the start of 1997, having now fallen eight quarters in succession and has more than halved since the height of the recession in 1992. Availability of new space has fallen by 77 per cent over the same period.

The Hillier Parker report finds that although total available space continues to fall the level of new space being marketed appears to have stabilised, with development completions and levels of take-up in balance. In certain areas, in particular the West End, there remains a shortage of good quality product.

There is a significant increase in demand with current requirements for office space up by almost 30 per cent on the previous quarter. As a result, Hillier Parker find leases are getting longer, rent free periods are shortening and rents across London for better quality space are rising and consolidating in the £375-£430 psm (£35-£40 psf) range. The supply shortage means tenants have had to broaden their area of search with Midtown and the fringe markets the main beneficiaries.

In the West End marketing/media requirements have doubled and oil sector requirements have trebled since the start of 1997. In the City the banking and financial sector continue to dominate.

Nick Axford, Head of Business Space Research at Hillier Parker, said: "The Central London office market is at a watershed. While top rents are attracting the biggest headlines, there is still too much hype based on one or two exceptional deals. Changes in the market as a whole are now more significant and are having an impact on both supply and demand."

Central London take-up totalled 298,700m² (3.2m sq ft) during the second quarter, an increase of a third on the total previous three months and highest quarterly figures since the late 1980s. Over 70 per cent of this was secondhand space. In the City take-up increased by 20 per cent and the West End by almost 45 per cent compared to the last quarter.

The increase in development activity seen since 1993 has now stabilised. Developments under construction in Central London totalled 543,700 m² (5.8m sq ft) at the end of the second quarter.

Two thirds of this current development in contained within the City. Development in Midtown is increasing and the market is seeing a growth in the number of pre-lets with over 40 per cent in the City and almost 55 per cent in Midtown of the space under construction prefer. Speculative space under construction is 100,000 m² (1.1m sq ft lower than 12 months ago).

Nick Axford said: "Despite evidence of an improving market, development activity remains lower than might be expected at this stage in the cycle. With supply likely to remain tight over the next twelve months, further rental growth is expected. While this may enhance the viability of quality schemes, the danger is that it may also lead to construction starts on buildings which will see a lower level of interest from the market."