Moody’s predict “imminent stress” for London
April 25th, 2008 | by Simon Rattray
Moody’s Investors service are the latest in a line of companies to cast a dire warning about the state of the London office market, writes Bloomberg.
This of course is not a revelation to anyone who has been monitoring the effects of the credit crisis in the past few months. However what is interesting is the number of jobs that may now be at risk. Previous estimates have put the figure at around 10,000 in the coming year to eighteen months but according to JP Morgan Chase the figure could be as high as 40,000.
In terms of office space in the capital, there is 15.6 million square feet of new space to be completed by 2010 which may mean rising vacancy rates, putting severe pressure on landlords. Moody’s have a sophisticated method of scoring the state of each city’s office space market and have scored London very poorly under their system. The “imminent stress” they refer to equates to over supply in the market. This pesimistic view contrasts with the opinion of former environment secretary John Gummer who rejected this notion.
The “bottoming out” phase still seems a far way off, and this credit crisis is clearly deeper than some could have imagined during the initial stages. Because macro ecnomic indicators are good (controlled inflation, low unemployment, controlled interest rates), it cannot by any means be called a full scale recession, as in the US one could argue. But the turmoil for London’s office market is here to stay for the forseeable future.
Paradoxically, the serviced office market may benefit because businesses are reticent to commit to a lease and so will look for a short term solution.
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