Cost-cutting challenge for 2012
Many corporate occupiers will be seeking to reduce costs this year, but Jones Lang LaSalle says the shortage of high-quality office space in a growing number of markets means that it will be more difficult for them to make savings.
The scarcity of good office space has encouraged landlords to hold rents firm for the very best properties, JLL says in its new Corporate Occupier Conditions report, and to start to reduce incentives. “This supply challenge has a direct impact on the ability to make cost savings,” the firm says. New speculative development also remains scarce, and JLL says it is likely to remain this way until developers are satisfied that there is a “marked and sustained upturn” in demand and finance becomes more readily available.
With Grade A vacancy as low as 2.1% in Manchester and 2.2% in London’s West End, JLL says corporate occupiers that are seeking transformation through space upgrades face a major challenge. The firm expects the lack of high-quality space in several markets to drive some rental growth in 2012, but notes that expectations have been reined in by the uncertain economic climate.
Occupiers may need to consider the pre-let market in order to deliver “transformative” property solutions for their wider businesses, JLL says. It adds that cost-effective, quality solutions that support consolidation are more readily available in the out-of-town markets across the UK.
