London commercial property market takes long pause

Capita Symonds report shows second consecutive quarter of low activity in Central London office market

Article posted: 18 Jul 2011

Figures recently released by Capita Symonds – part of The Capita Group Plc – show a second consecutive quarter of low activity in the central London commercial property market.

Take up of office space in Central London in Q2 2011 was below the historic quarterly average (since March 1999) of 3m sq ft for the second consecutive quarter. Take-up of office space in the City was at particularly low ebb - down by 22% over the previous quarter to 605,000 sq ft and down 36% on the same quarter last year (949,000 sq ft).

Office space in the West End fared better, but was down on the previous quarter by 9% to 722,000 sq ft and reflected a 35% reduction from the level achieved in the same quarter in 2010.

Alan Dornford, director - markets, Capita Symonds, said: “Although it is too early for this to be called a trend, it is evident that businesses are staying put and the office market is biding its time. Even allowing for the disruption of the extra bank holidays, the last quarter has seen fewer transactions and less space being let. As a city highly influenced by global trends, London inevitably reflects what is happening in the wider world and there is increasing evidence of a slowing world economy. Add the impact of high oil prices and the Eurozone crisis and there is an understandable caution in boardrooms. This caution is translating into a reluctance within businesses to move, invest, or take on new staff, with direct knock-on effects on the office market.”

Rents in the City are currently in the region of £55 per sq ft, some 4% up since the beginning of the year. Higher rents are also being achieved in the West End but even there comparatively few rents have been achieved above £70 per sq ft.

Alan Dornford, Capita Symonds, says: “Talk of West End rents galloping ahead to £100 per sq ft now looks a little premature. The two tier market of high demand for Grade A space, but much weaker demand for other space, will continue to be a key feature of the central London office market with rents expected to continue their faltering, but upward, trend until at least 2014 when the supply of new property will begin to cool things down.”

For a full copy of the report click here

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Posted by Ingrid