Slowdown in Office Construction Likely to Raise Office Rentals in London
According to the latest survey by Drivers Jones a property consultancy group based in London, the amount of construction currently being undertaken is lower by 47% from the peak level around eighteen months ago. This is likely to create a new shortage for office rental space in 2011, causing rates to go up by around 15%, according to their estimates.
In a stable economy, it takes between one and a half to two years to complete an office complex. However, the past two years have been anything but stable, the recession having led to a number of developers postponing or slowing down their projects for office space. Due to a marked decrease in credit lending facilities, these projects have also become less viable unless ready buyers or tenants are signed to take up deskspace as soon as it is made available. As a result, only twelve new projects have been undertaken in Central London in the past year, according to the report. This is nowhere close to the 61 projects a year being undertaken or the forty-four projects completed in a year at the peak of the real estate boom.
In 2011, only two of the five buildings scheduled to reach completion have signed up tenants ready to move in. the consultancy group’s report also says that of the 9.5 million sq ft of deskspace currently available in the city, only about 4 million is quality office space. This is likely to run out in the coming six months as occupant try to secure cheap rentals in anticipation of the coming upturn in the economy.
