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LONDON-The Central London office market is set for a busy second half of 2001 despite concerns over the global economy. FPDSavills’ agents say that last year’s surge in leasing activity has carried over into the first half of 2001. In the City rental increases of as much as 46% have been recorded. And significantly, over 70% of space leased over the first six months of 2001 was grade A, only serving to exacerbate the imbalance between supply and demand.

The City investment market is proving to be equally as robust as the leasing market with over £3.2 billion ($4.6 billion) of deals already registered this year. Mat Oakley, head of commercial research at FPDSavills says: ‘The continuing growth in the leasing market and the relatively low cost of money should ensure that the second half of 2001 is as active as the first six months of the year. While the volume of deals may not be as high, there are a number of very large investments being marketed that could push the turnover figure for 2001 very close to 2000′s record £5.8 billion ($8.3 billion).’

But in the West End the picture is rather different. The pace of rental growth has slackened over the past six months. FPDSavills ascribe this not only to occupiers’ reluctance to pay top rents, but also the lack of high calibre buildings capable of setting new rental highs.

And Oakley says a similar problem is affecting the West End investment market: ‘The marked downturn in the number of transactions over the first six months is due to the lack of available stock rather than the lack of commitment from the market,’ he notes.

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