X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.

LONDON-Current evidence suggests a cautious revival in the West End office market next year, but the process will be slow, says the King Sturge West End report for 2002, quarter 3.

The West End market has endured a sustained period of uncertainty, including an American downturn, further worsened by events of 11 September, a crash in the TMT sector, global corporate scandals and a surge in secondhand space. However, the market is faring better than others, such as the City and the Thames Valley, which are weighted with speculative schemes and pre-let surplus.

According to King Sturge, the relative strength and momentum of the current market is driven by an undercurrent of small deals and high levels of government activity.

The emergence of a two-tier market is another consequence of recent market activities and it is in the upper tier where most rental revival is envisaged. An example of this divergence can be seen in Mayfair, which currently accounts for 18% of total availability but also achieved the Q2 2002 headline rent of £75 per sf in a letting to a traditional City occupier.

Much of the revival in prime rents hinges on the constriction of new supply in the short to medium-term. Q3 2002 figures support this, with a fall in space currently under construction and diminishing supply of un-let accommodation (59% being pre-let or owner-occupied) in the three-year development pipeline. This restriction in the supply of new space, coupled with a predicted rise in demand, will create pressure for rental increase on new schemes as they complete, predicts King Sturge.

The news for the City of London is less good. King Sturge had hoped that the strength of the UK property market would be maintained and any economic fallout would be short lived. At the time, it noted that the commercial property market was in its best shape for over 30 years and in a prime position to withstand a minor recession. It was widely accepted that corporate decision-making would suffer as a result of the general economic uncertainty, but expectation was that the market would not collapse. So, 12 months on, the consequences are very much visible. The City office market has witnessed the lowest takeup (1.5m sf to Q3) since the end of 1992 when take-up totalled 2.9m sf, vacancy rates have more than doubled to 10.6% and rents have continued to soften towards £52.50 per sf.

Want to continue reading?
Become a Free ALM Digital Reader.

Once you are an ALM digital member, you’ll receive:

  • Unlimited access to GlobeSt and other free ALM publications
  • Access to 15 years of GlobeSt archives
  • Your choice of GlobeSt digital newsletters and over 70 others from popular sister publications
  • 3 free articles* across the ALM subscription network every 30 days
  • Exclusive discounts on ALM events and publications

*May exclude premium content
Already have an account?

Dig Deeper

GlobeSt

Join GlobeSt

Don't miss crucial news and insights you need to make informed commercial real estate decisions. Join GlobeSt.com now!

  • Free unlimited access to GlobeSt.com's trusted and independent team of experts who provide commercial real estate owners, investors, developers, brokers and finance professionals with comprehensive coverage, analysis and best practices necessary to innovate and build business.
  • Exclusive discounts on ALM and GlobeSt events.
  • Access to other award-winning ALM websites including ThinkAdvisor.com and Law.com.

Already have an account? Sign In Now
Join GlobeSt

Copyright © 2020 ALM Media Properties, LLC. All Rights Reserved.