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Boom London as office vacancy rates hit their lowest for over five years
13 Jul, 2007, London
BOOM LONDON AS OFFICE VACANCY RATES HIT THEIR LOWEST FOR OVER FIVE YEARS
Office vacancy rates in the core London markets of the West End and the City are now at their lowest for at least five years according to global real estate adviser Cushman & Wakefield. Vacancy rates in the West End stand at 4.1% and in the City of London at 6.2%. The figures are good news for those developers with major office schemes either under construction or with planning permission and are likely to encourage further speculative development to take advantage of the increased demand for prime space.
The West End is experiencing a developer’s ‘Shangri-La moment’ with the combined effect of a vacancy rate of 4.1% (the lowest since Q3 2001), prime rents now touching £117 sq ft (up from £110 sq ft in Q1) and active demand for office space up almost 20% on Q1 at 6.2 m sq ft (with ‘only’ 2.5 m sq ft of new space in the development pipeline).
The outlook for the West End remains good. Options for occupiers are slim in the traditional cores of Mayfair and St James’s which means more peripheral areas such as Victoria and Paddington will likely benefit from this increased demand. The financial sector is dominating letting activity accounting for 24% of the 1.9 m sq ft of space taken in the West End so far this year and also accounting for 17% of the active demand of 6.2 m sq ft.
Guy Taylor, head of West End offices, Cushman & Wakefield said: “There is no sign at the moment of the West End market stalling. All of the indicators are positive and the only thing that may effect the take up of office space is simply the relative lack of new development currently available. Canny developers however are now moving forward with the development of new schemes which should soak up some of the demand that has been identified.”
Prime office rents in the core City of London market have risen 8% since the start of 2007 and are up 18% year on year to stand at £65 sq ft. Net effective rents have increased 50% over the last 18 months. Combined with a vacancy rate across the City & Docklands that has fallen almost 20% so far this year from 7.5% to only 6.2% (the lowest since Q1 2002), and active demand up 20% to 7 m sq ft since the start of the year, the market is experiencing a period of sustained and significant growth.
Whilst vacancy rates have dropped, total demand levels have correspondingly soared by 40% in the year to date with take up of office space standing at 2.9 m sq ft. An extra 20,000 net jobs are expected to be created in the City by 2010 and this increasing level of demand for office space is expected to continue.
These buoyant conditions have encouraged developers to move ahead confidently with major new schemes. There is currently 6.4 m sq ft under construction or being refurbished which is due for delivery by the end of 2009. There is also a further 8 m sq ft which has planning permission or where demolition has already started.
James Young, head of City offices, Cushman & Wakefield said: “What we are witnessing in the City and Docklands market is a combination of both increased demand for office space and a large, but sustainable, development pipeline. This should ensure that both rental growth and increased take up will be maintained for the foreseeable future.”
For further information, please contact:
Chris Bond, UK Media Relations Manager
Tel: + 44 20 7152 5006 / 07793 808 006
Notes to Editors:
Cushman & Wakefield is the world’s largest privately held real estate services firm. Founded in 1917, the firm has 201 offices in 55 countries around the globe, and more than 12,000 talented professionals. Cushman & Wakefield delivers integrated solutions by actively advising, implementing and managing on behalf of landlords, tenants, and investors through every stage of the real estate process. These solutions include helping clients to buy, sell, finance, lease, and manage assets. C&W also provides valuation advice, strategic planning and research, portfolio analysis, and site selection and space location assistance, among many other advisory services. To find out more about Cushman & Wakefield, please visit the firm’s web site at www.cushmanwakefield.com.