subject: Is demand for London office space about to outstrip supply? [print this page] Is demand for London office space about to outstrip supply?
London office space has long been famous for its stylish interiors, desirable locations and A-Grade status. In the past anyone looking to rent floor space in the capital's business venues have been spoilt for choice, with a plethora of commercial properties available to lease right away but could that all be about to change?
The recent economic downturn hit nearly every industry in the world hard, not least the commercial property market. Developers all over the world put major builds on hold as they ran out of finance and demand nosedived. Key office projects put on hold in London include The Shard, which once completed will be Europe's tallest skyscraper, the Heron Tower and the Pinnacle. Land Securities also put the brakes on their new Walkie Talkie build in Fenchurch Street over fears it wouldn't be able to secure tenants.
About a year ago the situation was so bad that a planning officer at the Coporation of London, Peter Rees, said he didn't expect to see any new skyscrapers in the City, apart from the Shard, for at least a decade.
Now that the country is in the full swing of the recovery, a number of high profile developers have flocked back to the city to put the wheels back in motion for their new London office builds, which are worth a total of more than 9 billion. In the last few months the Beetham Organisation have confirmed it will start work on two towers; Trinity in the City and The Beetham Tower in Blackfriars in 2011, while Minerva is in the middle of 2 new builds near Bank and Aldgate.
While there's no doubt this signals an improvement in market demand and conditions, there are fears that the developers have been too slow to react to the London office space market. A number of major organisations are coming to the end of their office space leases in the coming year Jones Lang LaSalle predict there will be more than 20m square feet of office space expiries by the end of 2015 but will there be enough office space to meet the imminent surge? Many experts believe not!
Some of the major organisations with lease expiries coming up in the next 6 years include Santander, Aon and Thomson Reuters. But how much choice will they have? Not a lot it seems! A result of the lapse in London office space development caused by the credit crunch has meant that only a handful of new office builds will be completed in the next few years; leading many companies to fear that there will not be enough choice for everyone.
So it seems the London commercial property market is in for a challenging couple of years as London developers struggle to keep up with the demand for new floor space in the capital. We'll have to wait and see if London office demand does indeed outstrip supply or if supply can keep up and finally get its feet back on the ground after the recession.
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