THE City of London is currently suffering from a shortage of Grade A commercial property but plans for fresh new build projects remain few and far between, developers warned yesterday.
Speaking at MIPIM – the property industry’s annual conference in Cannes – developers said despite projects coming on stream over the next few years, including the Walkie Talkie, Heron Tower and Shard of Glass , adding an extra 600,000 square feet of prime office space to the City, further new projects were unlikely. And developers say it’ll take somebody very brave to put their spade in the ground first and start a project from scratch.
“I don’t see it happening right now,” Gerald Hines, founder and chairman of Hines told City A.M. “It’ll be a gutsy move even if they have the financial capacity.”
The lack of development is driving a rise in City rents as quality properties are now in high demand. With yields and rents continuing to improve banks will be unlikely to offload any of their commercial real estate onto the property markets. But they are desperately looking to shed secondary property. It is estimated Royal Bank of Scotland will look to sell £20bn worth of these assets over the next three to five years.
Consultants said the property market should brace for a huge flood of assets released by the banks this year as they adjust their balance sheets.