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LONDON-A slump in office take-up in central London has pushed the vacancy rate up for the third consecutive quarter, according to new research from CB Hillier Parker. Even before 11 September, occupiers were suspending decisions on office moves, and take-up fell by 40% in the third quarter to its lowest level for five years.

Just 2.34 million sf of office space was taken during the quarter, and this weakening in occupier demand was reflected in a 10% drop in identified requirements. However, CBHP points out that known demand still exceeds current availability. The overall vacancy rate rose from 3.2% to 4.1% over the quarter.

In spite of this deteriorating outlook, CBHP remains confident about the prospects for the central London office market, pointing out that development activity is still constrained by planning and funding considerations. There is currently 20.45 million sf of office space under construction in central London, although nearly 60% of this is already committed. Speculative development starts fell during the quarter, and CBHP says the funding environment for speculative schemes has tightened even further, implying that the institutions are already moving to choke off the supply of new space.

Average rents fell in the West End for the second consecutive quarter, and CBHP now puts prime West End levels at £80 ($115) per sf, down from £85 ($122) three months previously. The City saw continued growth, however, with prime rents edging up from £60 ($86) to £62.50 ($90) per sf over the quarter. Rents in Midtown, the City Fringe and Docklands all remained static at £57.50 ($83), £50 ($72) and £45 ($65) per sf respectively.

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