London’s Financial District Encourages Investment

All the pieces of the jigsaw puzzle are falling into place as London proves its status as the major global financial centre. A steady flow of large lettings, combined with financial institutions wanting new large buildings, has prompted developers to move ahead with major schemes, notably at Broadgate in the City. Underpinning the improvement has been a hunger by investors, particularly foreign inveters, for buying Grade A offices in London. The shrewd buyers who moved back into the market in late 2008 and early 2009 have reaped the benefits. Also profiting from the situation are a number of developers, such as Irvine Sellar with the Shard of Glass at London Bridge and Gerald Ronson in Bishopsgate, proving their optimistic perception of a turnaround in London were correct. Rents have responded to the stronger market with substantial improvements. The question now is whether this progress will continue. At the moment there seems no reason why the market should not continue its improvement because there are clearly enough investors wanting to buy and companies to occupy space to keep it moving ahead. Cushman & Wakefield (C&W) is clear about the strength of the current situation, saying:

Office space leased so far in 2010 is more than double compared with the same period last year;

- However the second quarter was quiet in the City as tenants take stock of a new government and emergency budget

- The lowest level of office construction since 1993 is causing availability to fall steeply;

- A large number of leases expire in the next five years, which could act as a catalyst for increased demand;

- A growing shortage of prime space has led to increased pre lets.

C&W’s James Young said of the City: ”Occupiers are still cautious about sanctioning moves in the current economic climate, but they realise the supply squeeze is going to lead to a lack of options, and so pre lets will start making a return.” Matthew Elliott of Drivers Jonas Deloitte commented: “There has been a huge rental growth since November in some parts of London. We have already seen increases of 15% in the City and this will continue but only for the best new buildings.”

The London Commercial Property Register

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