RICS predict gloom for London office rental values
April 20th, 2008 | by Simon Rattray
The Royal Institute of Chartered Surveyors has predicted an acute slowing in the London office rental market. They have stated that as prices are more volatile than in other parts of London, the City will feel the effects of the credit crunch more so than other areas.
Rental growth for office space in the capital will fall to “sub inflation” levels by the end of the year, according to RICS, with the City facing much a sharper slow down due to the area being dominated by banking and financial institutions.
This premonition about the state of the London office market was echoed by Lehman Brothers, as reported by Choregus, who said that demand was “slip, sliding away”, due to massive over-supply. The benefits of a low vacancy rate will be nullified by the new space that will come onto the market in the next few years, RICS argue. With over 12 million square feet on construction underway in the capital it is easy to see why there may be problems ahead. This is because of this 12 million square feet of construction, 7.4 million square feet of it is taking place in the City itself.
Rental growth will reach a negative by 2009 claim the RICS, with the City experiencing the most acute falls in rental values. On the face of it, lower rental values should please the City’s tenants. However the macro economic effects of a lack of liquidity in the market means that it will be of token importance when compared to the big picture.
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