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March 8, 2010
London Leading UK’s Office Market Recovery
According to Kings Sturge data, the second half of 2009 started off with signs of recovery for the UK office market, and with the London market leading the way. However, this recovery seems to be uneven since a number of regional centres are showing a much slower return to growth.
King Sturge office research partner Andrew Burrell said: “We are witnessing a two-speed recovery.”
This effect is largely due to the fact that London is a major attraction to all the high-value-added and globally-traded services which means its economy is more volatile than the rest of the UK, but on the other hand it ensures it grows more rapidly over the cycle. So after a deep trough, the rebound in London offices is most vigorous.
King Sturge said “UK’s office markets remained a tenant’s market with occupiers facing the widest choice and most attractive rents and incentives for years”. However, the signs of recovery suggest this may not last for long.
The performance gap between the capital and the rest of the country is expected widen during the revival of the markets, with central London experiencing the earliest reversal of fortunes and leading the office market in 2010, driven mainly by the financial sector.
Furthermore King Sturge’s data reveal that the worst of the fall in office rents is over and that the capital’s prime rental growth in 2010 will be one of few but it will be several years before recent declines (of 35% on average) are reversed.
In the regions, the correction has been milder (at -10%) and growth will take longer to return.