Office demand shows glimpse of a recovery

Kasmira Jefford
Follow Kasmira
DEMAND for office space in central London has risen to its highest level since 2009, as a pick up in occupier interest began to catch up with the continuing shortage of supply.

Figures from property consultancy Jones Lang LaSalle (JLL) show that registered demand from potential tenants increased by over 12 per cent over the past 12 months, with total demand now at 12.6m square feet.

“We are starting to see signs of life across central London,” Dan Burn, head of City agency said, adding that this was driven largely by expansion in the technology, media and telecoms sector.

Demand, however, still remains five per cent below the 10-year average, JLL said in its quarterly market report.

Economic uncertainty and the ongoing Eurozone crisis means companies have been reluctant to move offices and commit to new space, causing leasing volumes to remain low.

But while take-up of new office space is expected to remain subdued in the short-term, JLL said businesses were starting to take a more proactive stance and a return in confidence.

“We are seeing a number of requirements which are quietly in discussions on existing and future product which could lead to an increase in activity in the second half of 2012”, Burn said.

“The combination of the erosion of the existing supply and the occupier interest being shown in buildings being delivered into 2014, such as 20 Fenchurch street, will further restrict the supply pipeline and consequently the options available for the pent up demand.”

With no new committed construction for delivery beyond 2015, JLL said it expects a rise in rental growth from 2013 and a pick-up in speculative building projects.