UK Property News 3rd November 2011

Central London office take-up recovered strongly in the third quarter, but will still end the year significantly down on 2011, according to DTZ’s Property Times report.
 
DTZ also updated on the starkly polarised investment markets in the City and Docklands, where £4.9bn of stock is available, and the West End, where just £500m is officially available to buy. Take-up rose 50% to 2.9m sq ft in Q3. The figure brings the 2011 total to 7.5m sq ft to date, leading DTZ to predict 10m sq ft of lettings by the year end – significantly down on the 15.5m sq ft seen in 2010. DTZ writes that with prelets stripped out the comparison will be at best about three quarters of the level seen in the previous years. Availability has continued to decline, reaching 13.3m sq ft, a ratio to stock of 5.7%. However, DTZ points out that newly built or refurbished availability has remained relatively stable, but a substantial fall in the level of secondary space has reduced overall availability.
 
The fall-off in leasing activity in the year has “dampened” rental growth in the City and surrounding submarkets. However, prime West End continues to enjoy rental growth, reaching £92.50 per sq ft thanks to continued competition for small floorplates in Mayfair/St James by the financial sector. Office investment activity in central London fell in the third quarter to £1.7bn, bringing the first nine months total to £6.2bn.

DTZ expects activity in the final quarter to recover thanks to the £4.9bn of stock available in the City and Docklands, mostly in large lot sizes. In stark contrast DTZ reports that just £500m of stock in available in the West End principally in lot sizes below £40m. It writes: “The investment total for 2011 will depend on how many major transactions in the City are completed in the New Year. “There are indications that bank lending on such large lots may now be more difficult to secure, and that syndication is emerging as a more likely avenue. Until recently there was a shortage of stock in the City, but this current glut of large lots may put pressure on vendors to reprice more competitively so as to secure sales.”