LONDON-Central London office vacancies stood at 15.5 million sf at the end of the second quarter of 2002, up 13.6% in just three months, according to a new survey from CB Hillier Parker. But the overall vacancy rate–up from 5.6% to 6.4% over the quarter–is still relatively low. Vacancy rates are highest in the West End where 7.5% of the office stock is now available.

At the same time demand is declining, with 15.8 million sf of requirements logged by CBHP. The slump in capital market activity has hit demand in the City of London particularly hard, with a 16% fall in requirements over the second quarter of 2002.

Reflecting this negative backdrop, rental values fell for the third consecutive quarter, driven largely by an increase in unwanted tenant space on the market. And CBHP warned that a further shake-out in financial services employment is likely, which will put City and Docklands rents under further pressure. But the West End, with its broader employment base, is likely to be the first London market to recover.

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