Banks and financial services boost London's office market
24 Jul, 2006, London
Banks and financial services firms are driving London's office market in 2006 as the implementation of the Lyons Report recommendations reduces activity from the public sector.
Property adviser Cushman & Wakefield's report Central London MarketWatch shows that the take-up of office space in the first six months of the year stands at 4.7 million sq ft, up over 1.3 million sq ft (or 40%) on the same period in 2005.
Banks and financial services firms have accounted for 39% of all office take-up so far in 2006 against 26% for 2005 and 22% in 2004. The take-up of new office space in London is a key barometer of business confidence and the activity of the financial services sector is evidence that recent turbulence in world stock markets has not dented its confidence in the economic outlook.
Public sector & Government take-up has been severely curtailed with the implementation of the Lyons Report's recommendation to relocate thousands of civil servants into the regions for regenerative and cost benefits. This has been clearly felt in London's West End market, the most expensive office market in the world, where public sector take-up has accounted for only 9% so far in 2006 against 32% in 2004. Across Central London as a whole its percentage has fallen from 16% in 2004, 8% in 2005 and now accounts for only 4% so far in 2006.
The market is also being driven by falling availability of office space. Figures for the second quarter of 2006 show that in the West End it now stands at 5.7% (the lowest since 2001) and at 8.3% in the City & Docklands (lowest since 2002). This historically low figure has prompted a number of developers to begin speculative development of major schemes including Bow Bells House, EC4, 150 Cheapside, EC2 and 200 Aldersgate Street, EC1. These three City schemes alone will deliver over 750,000 sq ft of new space by 2008. The total Central London development pipeline due to complete by the end of 2008 now stands at 6.5 million sq ft – equivalent to more than 12.5 'Gherkins'.
James Young, head of the City office, Cushman & Wakefield said: "The growth of financial services companies has impacted right the way across Central London, from the more niche hedge funds in the West End to the larger banks in the City and Canary Wharf. The lack of supply will inevitably impact on rentals, and these are now increasing in the City, as they have been in the West End for sometime".