Lehman Bros predicts 15% fall in City rental values
April 13th, 2008 | by Simon Rattray
Lehman Brothers last week warned that demand for office space and rental values are set to fall in the City of London for the first time since 2004.
They forecasted that five and half million square feet of new office space will appear on the market in next two years but with no agreed tenancies.
Worryingly, Lehman also stated that there could be falls in rental values of up to 15% over the next two years which will widen the gulf between the City and the West end office markets. With up to 10,000 city jobs disappearing over the next two years, there is the very real prospect of oversupply putting pressure on rental values.
The idiosyncratic composition of the City means that this should come to no surprise to anyone, as banking and financial institutions make up the vast majority of commercial office space in the square mile. Removing 10,000 workers from this location means quite simply that companies will not need as much workspace.
However it is important to recognise that the City is a unique case, and whilst the London office market performance is sluggish at present the wider picture is not as gloomy. John Gummer, former Environment Secretary commented that “overall there is no systemic oversupply of office space.”
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