Lambert Smith Hampton - Offices General - West End Office Market

Date: 13 Jun 2002

Demand for grade A office space in the West End continued to weaken, whilst availability rose in virtually all sub markets in the first quarter of 2002, according to Lambert Smith Hampton’s latest West End Office Market Bi-Monthly Summary. The only exception was Victoria/Westminster where increases in Government requirements soaked up excess space.

Although overall take-up was marginally up on the last quarter of 2001, this was accounted for by occupiers letting grade B and C space. Take-up for grade A space declined, as tenants continued to vacate or sub-let space to mitigate liabilities. Headline rents suffered across the board, with the Victoria / Westminster market seeing a drop from £57.50 per sq ft in early 2001 to £52.50 early this year. The latest figures from the IPD support this fact: average rental value growth slowed from 18.2% a year ago to just 0.5% in the year to March 2002.

After a flurry of activity in the investment market in the closing months of 2001, the opening of 2002 has been slow. The market continued to be dominated by private investors using debt to fund purchases and this looks set to continue with low interest rates and disappointing stock market returns.

Arezou Said, head of research at Lambert Smith Hampton says: “With companies putting a hold on recruitment due to the subdued economic climate, we foresee no real turnaround in the market until 2003. The sub-letting by Orange of the entire 21,367 sq m (230,000 sq ft) they took at the Point Building in Paddington Basin is indicative of the market. With an increase in schemes due to be come on the market soon and in the pipeline, it will be some time before things pick up.”

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