Credit crisis causes office glut in City
7 Apr 08
Economic uncertainty sees office lettings in financial district down by almost a third over past six months
A report in the Financial Times found that office take-up in the key City of London market fell 40 per cent in the six months to March, compared with the six months previously, and 60 per cent in the Docklands area as the effects of the credit crisis hit financial occupiers.
The City office market is a barometer of the health of the financial sector, showing banks and financial institutions deferring relocation decisions and reining in headcount expectations.
There have been predictions of more than 10,000 job losses in the City as banks struggle in the wake of the subprime lending crisis.
The sharp falls in lettings were disclosed in a quarterly update from Jones Lang LaSalle, the property consultant, which also showed the City office market was facing the first downward pressure on rents since 2004.
Jones Lang forecasts a 2 per cent drop in prime rents in 2008, and a higher drop for larger office lettings. Previous forecasts predicted growth.
With the real estate investment market still struggling, property owners and developers are becoming more dependent on income from rents to buttress property values.
The proportion of space let to banking and finance occupiers fell from an average of 32 per cent in 2007 to just 11 per cent in the first quarter.