Lease expiries may threaten office market – Jones Lang LaSalle
Jones Lang LaSalle is predicting that large-scale lease expiries or break clauses could threaten a recovery in the UK commercial property market, if occupiers take the opportunity to downsize.
The Telegraph reports that JLL has calculated a total of 6.2m sq ft of expiries and lease breaks in London during 2012, with another 8m sq ft in the UK’s main regional cities. JLL says the importance of the lease events “cannot be overstated”. It says developers have been targeting occupiers with lease events as potential tenants, and notes that occupiers have been demonstrating a greater tendency to extend and restructure leases. It says companies that will be seeking new office space in London this year include the new Prudential Regulatory Authority, Saatchi & Saatchi and LinkedIn – but adds that these requirements total only about 775,000 sq ft.
JLL expects offices take-up for the UK this year to fall well below the 10-year average, with City take-up forecast at 3.7m sq ft compared with an average of 5.1m sq ft.
However, despite this weaker demand, JLL expects continued growth in rental values, forecasting 1.7% growth in UK offices values this year, with 3.5% growth in the West End and 3% in the City as a result of the scarcity of new developments. The firm has in fact warned that the West End could run out of prime office space within eight months, and the City within 11 months, based on historical take-up rates.
