Surging demand fuels commercial property recovery

BUSINESS take-up of commercial property space in the Central London area shot up in the first three months of this year, according to Jones Lang LaSalle, the commercial real estate services company.

Total take-up was 3.5m square feet, an increase of 20 per cent from the fourth quarter in 2009, and was largely driven by the City, which recorded the largest first quarter total since 2000.

Space let to the banking and finance sector in the City rose 71 per cent, compared to the last quarter of 2009, and accounted for 54 per cent of total quarter one take-up.

Jones Lang LaSalle said returning business confidence was behind the result but warned that demand levels had now tailed off.

Neil Prime, head of markets at Jones Lang LaSalle, said: “The level of new demand has not been sufficient to replace that demand we have seen transacting.”

Nevertheless the lack of speculative development in the commercial property market means rents will continue to rise in 2010. Supply has fallen sharply over the first quarter to 16.7m square feet and overall Central London vacancy rates ended March at 7.7 per cent.

Bill Page, head of EMEA offices research, said: “Eroding supply drove rental increases with prime headline rents growing six per cent in the City market in quarter one.”

Jones Lang LaSalle said the lack of supply, particularly of large units of space, is expected to lead to the return of the pre-let market.