Central London office market

Citation

(1998), "Central London office market", Property Management, Vol. 16 No. 4. https://doi.org/10.1108/pm.1998.11316dab.016

Central London office market

Central London office market

There has been a doubling of committed space under construction and a 22 per cent increase in speculative space being built in Central London ­ according to the latest research from international property consultants CB Hillier Parker. Developments under construction in Central London totalled 759,100m² (8.2 million sq.ft) at the end of the second quarter. However, large office developments continue to be let prior to completion. As a result, only a small proportion of the space now being built is likely to reach the open market.

Dr Nick Axford, director, who heads up CB Hillier Parker's Business Space Research team, comments: "Current gloomy predictions of an economic downturn contrast strongly with the high levels of activity seen in certain areas of the market at present. Levels of demand remain fairly stable, but lower than 12 months ago. Recent merger and acquisition activity coupled with expansion in several key sectors is now clearly feeding through into active requirements".

Central London take-up in the second quarter totalled 309,800m² (3.3 million sq.ft), the third highest quarterly total since the late 1980s. Although not as high as in the previous two quarters, the overall level of take-up remains healthy.

Despite high levels of take-up, demand from the marketing and media and the banking and finance sectors remains healthy ­ together they account for almost 70 per cent of current demand. New requirements continue to feed through in the West End and City.

"The practical consequence of the lag between the economic and property cycles is becoming painfully apparent", comments Dr Nick Axford. "Whilst demand is far from booming, there remain unsatisfied requirements in the market and new demand continues to emerge."

Currently, two-thirds of the 495 named requirements in the market are seeking units of less than 1,000m² (10,760 sq.ft). CB Hillier Parker sees this as encouraging given that the majority of the London market comprises smaller units.

Dr Nick Axford added: "Although expectations of rental growth have eased over the last six months, and the majority of developers continue to await a pre-let before starting construction, there remain opportunities to successfully introduce new buildings into the current market.

"Having waited for clear signs of demand before starting speculative construction, developers will continue to bring forward schemes until there are equally clear signs that demand has fallen away. The first indication that this is beginning to occur will be an increase in the number of speculative schemes which fail to attract an occupier prior to or shortly after completion.

"The most significant contribution of the schemes which have started over the last three months may not lie in their ability to ease the current supply shortage but in their role as a litmus test of the strength of future demand."

At the end of the quarter there was 867,700m² (9.3 million sq.ft) of office space being marketed in Central London, an availability rate of 5.4 per cent. Availability fell by 90,400m² (973,000 sq.ft), a 12 per cent decrease on the previous quarter. This is the lowest level of availability since 1988. A quarter of the total space being marketed is under offer to tenants.