Office vacancy rates in the City of London are likely to move into double-digits by the middle of next year, as mass layoffs in the banking sector take their toll, according to Andrew Burrell, a partner at King Sturge in London.
Office vacancy rates in the City of London are likely to move into double-digits by the middle of next year, as mass layoffs in the banking sector take their toll, according to Andrew Burrell, a partner at King Sturge in London.
'Supply is going to outstrip demand in a way it hasn't done for several years. Companies are considering whether to move or not much more carefully,' he said.
Vacancy rates in the City of London currently stand at around 7.8%, according to King Sturge. Rising vacancy rates will inevitably put downward pressure on rents.
'We think rents in the City are likely to fall by up to 10% over the next 18 months. But it's hard to predict just how much surplus space will come to market from the banking sector - our estimate is quite conservative, so rents could fall even more,' Burrell said.
Prime rents in the City of London are between £55 (EUR 70) and £57 (EUR 73) per square foot (0.09 m2). King Sturge estimates that they will drop to around £50 (EUR 64) per square foot and stay at that level until 2011. In London's other large office submarket, the West End, rents are also likely to fall, but more slowly, from £110 (EUR 141) per square foot to around £100 (EUR 128) per square foot by 2010. The West End has less exposure to the financial sector than the City, which makes it a less volatile submarket.
