Prepare for a rise in pre-lets, is the message from CB Richard Ellis’s Central London Pre-Let Market report.
The commercial property services firm says the combination of a squeeze in supply, inadequate volumes of development and continued rental growth are expected to usher the industry into an increased period of pre-letting over the next two years.
Completions for 2011/12 are forecast to be at their lowest level for fifteen years, remaining static until 2014 when a cluster of towers will be ready. According to CBRE, these buildings, including the Cheesegrater and Walkie-Talkie, will satisfy the type of demand for large commercial property shown by UBS, Aon and BNP Paribas, who have all recently agreed substantial pre-lets.
A distinct lack of new ‘vanilla’ buildings – commercial property between 50,000 and 200,000 sq ft – is referenced, together with the findings that a high number of City leases are due to expire in the next five years. This is anticipated to encourage existing tenants to arrange pre-lets, guarding against future upheaval. After all, it would not do for the average international conglomerate to find itself homeless!
Recent trends are compared against longer-term statistics. Spanning the years 1985–2010, London’s commercial property market is split into five separate areas in the report. The City is top of the pre-letting pops – 44% of all pre-let transactions over 100,000 sq ft occurred there. Trailing behind with 19% is the West End. The Docklands and Midtown follow, with 13% each, then Southbank brings up the commercial property rear with 11%.
When analysing the past ten years, an increase in pre-letting is found, both in Docklands, accounting for 15%, and Southbank, which has shot up to 18%.
Fashionable soul that it is, the West End is one commercial property market that will not follow the pre-let progression, say CBRE. It attributes this to the lack of large commercial property availability, coupled with the typically smaller size of new developments in the region.
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