Property Rentals in London May Skyrocket Within Three Years
The current postponement or cancellation of commercial office projects in London is likely to result in rentals jumping to new highs in 2012, according to international real estate consultant King Sturge. A number of construction projects in London’s office district, including the “Cheesegrater” by British Land and the “Walkie Talkie” by Land Securities, have been put on hold due to the financial slowdown.
The current recessionary trend has led a number of companies to impose cutbacks in manpower. Approximately 58,000 employees have been laid off by banks and insurance firms, causing a surplus of available office space to let. This in turn has resulted in a drop in property rentals and the risk of properties remaining empty. Also, there are new environmental regulations, rising costs and the credit crunch which have caused builders and developers to rethink current project investments. With so many negative indicators, it is no surprise that the majority of new developments have stalled for now. The current available office space in the city is estimated to be the equivalent of almost 20 Gherkin Towers.
On an average, the city draws 2.2 million square feet for new office space every year. However, this year, only the Heron Tower has come up. It was even reported that Spanish real estate developer Metrovacesa actually paid a hefty penalty to get relieved of completing the purchase of a site in London.
Therefore, in 2012, when demand rallies, there will be no new office space in the city, leading to a steep hike in rentals. King Sturge estimates that rentals may go as high as ₤47.5 per square foot in 2012.
