London Office Availability Grows as Economy Slows

LONDON-The London office market has cooled during the first half of 2001 after record performance last year, according to new research from Knight Frank. The slowdown in the US economy and uncertainty over the outlook in Europe has led to a cautious approach among potential occupiers. Prime rental growth has slowed while fringe locations have become more attractive to traditional core tenants, the agent claims.

Knight Frank’s Central London Quarterly research shows supply rose by 21.6% over the second quarter of 2001 as space was returned to the market. But take-up also increased over the same period by 20.6%. A surge in activity in the City boosted the quarterly figures, with a 72.7% quarter-on-quarter increase in leasing activity. Conversely the West End saw a quiet quarter with a fall of 33.1% in transactions.

Knight Frank Associate Sarah Bate noted: ‘Demand for large new buildings remains high. Quarter 2 saw the pre-lettings to Lehman Brothers at Canary Wharf, to Ernst & Young at More London and to Marks & Spencer at Paddington Basin. This shows the attraction of locations outside the traditional West End and City core markets.’

On Knight Frank’s calculations there is currently 16.5 million sf of office space under development across central London, the majority of which is pre-committed. Bate commented: ‘A lack of speculative development will do little to help the shortage of new space on the market at present.’