Take-up in the Central London office market during quarter two increased by 37% in comparison to the previous quarter and is this first rise in 12 months says DTZ. According to statistics revealed in the summer edition of the Central London Offices report, published by DTZ Research, take-up rose from 0.16 million sq m (1.7 million sq ft) recorded in the first quarter, to 0.22 million sq m (2.4 million sq ft).
However, although there are signs of a revival in take-up levels, the gulf between take-up and availability continued to widen in Q2 with availability rising by 10% to 10.49 million sq m (26.8 million sq ft), up from the 2.25 million sq m (24.2 million sq ft) recorded at the end of the first quarter. Availability in Central London now stands at 12.5% of stock compared to 7.6% at the end of 2001.
Despite the increase in total availability, the delivery of newly marketed space has slowed from 0.6 million sq m (6.5 million sq ft) in the first quarter to 0.47 million sq m (5.0 million sq ft) in the second quarter.
The development tap has also been turned off with office space under construction in Central London now totalling 1.2 million sq m (12.5 million sq ft), a fall compared to the previous three months. Of this total, 0.48 million sq m (5.2 million sq ft) is speculative and two thirds of this latter figure will be delivered in the City sub market. There have been no major development starts in the second quarter of the year in Central London.
In terms of rental levels, statistics from DTZ Research show that prime headline rents in the City have continued to fall and are now estimated to be ÃÂ£511 per sq m (ÃÂ£45 per sq ft). In contrast, West End prime rents have remained unchanged at ÃÂ£646 per sq m (ÃÂ£60 per sq ft.).
John Forrester, Head of Central London at DTZ, comments: 'Whilst signs suggest that business confidence and demand may be improving, uncertainty over prospects for the economy and the property market generally is still causing developers and occupiers to adopt a cautious approach. Until we see the month-on-month rise of availability plateau, we can see no prospect of positive rental growth in the Central London office market.'
Investment activity rises by 42%
Investment activity in Central London has risen by 42% in the second quarter from a total of ÃÂ£0.93 billion in the first quarter to ÃÂ£1.33 billion in the last three months. Almost 60% of this figure emanates from the City market which saw investment purchases total ÃÂ£780 million, substantially higher than the figure of ÃÂ£398 million recorded in Q1. A major contributory factor to this rise was the purchase of Alban Gate, London Wall, EC2 for ÃÂ£240 million by Matrix Securities from CIT.
Foreign investors comprised 45% of the value of transactions in the quarter, compared with 55% in the preceding quarter. Unlike the first quarter in which German funds, notably CGI and KanAM Grundinvest, were active, spending over ÃÂ£300 million, the second quarter saw just one reported transaction by German open ended funds Ã¢â¬" DEGIÃÂ´S purchase of 1 Carter Lane, EC4 for ÃÂ£67 million. This however, reflects a lack of stock rather than any diminished appetite on behalf of these funds. Indeed arguably, the desire for product by these funds is probably more pronounced now than at any other stage in their involvement in the UK market.
UK institutions are beginning to reassess the value implications on some of their stock and a number have concluded that the fundamentals of the occupational market will impact on the short to medium term prospects. In contrast, there are a number of high net worth individuals (both domestic and overseas based), who are active in the market, buoyed by cheap finance facilities.