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LONDON-Supply in the West End of London stabilised in the second quarter of 2003, according to a new survey from Jones Lang LaSalle. But the City and Docklands markets continue to exhibit steadily rising vacancy rates. With take-up continuing at a low level, letting terms remain under significant pressure in terms of reduced rents, increased incentives and shorter lease terms.

The vacancy rate in the West End is unchanged at 6.9% but in the City the vacancy rate increased from 10.9% to 12.6% and in Docklands from 12% to 14.8% during the last three months. The overall Central London vacancy rate is now just short of 10%. Development completions have brought speculative development activity down to 6.15 million sf, but still representing a 30% potential addition to current supply.

Take-up in Q2 totalled 1.3 million sf, almost exactly equal to the previous quarter. With year-to-date take-up now at 2.7 million sf and 1.2 million sf under offer at the quarter-end, it is possible that 2003 may fail to keep pace even with the 6.4 million sf achieved in 2002, which itself was the lowest since 1992. 

As a result, headline rents continue on their downward path. JLL estimates that average Grade A rents have fallen by around 10% already this year, in both the West End and the City.

Phillip Howells, Head of the Jones Lang LaSalle West End Agency Team said: “With evidence of supply stabilising at about 7% and with increased active demand we may now be moving closer to the bottom of the cycle, although pressure on rents, and more so on tenant incentives, will continue as long as take up remains at current low levels, which is anticipated to be the case for at least the next 12 months.”

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