“London’s strongest quarter since 2001”
Jones Lang LaSalle’s latest research on the Central London commercial property market has concluded that the capital has just seen its strongest quarter since 2001.
Neil Prime, head of markets at the group, said: “The total take-up of 3.5m sq ft was 20% up on Q4 2009 and improvements were driven by the City, which recorded the largest Q1 total since 2000. Across London, the 12-month rolling total of 9.7m sq ft was just 5% below the 10-year average, while the City submarket ran ahead of the average”.
Jones Lang LaSalle has noted, however, a sharp fall in occupier demand of 18% during the quarter, to 12m sq ft. This has returned the market to Q1 2009 levels, after the jump in demand during the final quarter of last year, it points out. Prime thinks the fall in demand was expected in many ways, as the robust level of take-up would naturally erode the demand base.
“We anticipate the demand this year will continue to be driven by structural events such as lease expiries and not by business expansion. Therefore even though replacement demand has been at its lowest levels since 2008, even with modest levels of take-up during the course of this year, we anticipate the continued reduction of Grade A supply and therefore we will see continued rental growth,” Prime adds.
Thanks to a lack of speculative development, there is a “real opportunity” for developers to generate outperformance, he says, while for occupiers wishing to relocate the lack of supply may cause difficulties, particularly with regard to large units of space.
