Drivers Jonas calculates that there is currently 10.7 million sf of offices under construction in central London, down from 14.7 million sf six months ago. But 46% of the floorspace is being built without an occupier, up from 41% in the spring.
The problem is most acute in Midtown, where over 70% of current construction is speculative. The situation has eased slightly in the city, where 59% of activity is now speculative against 67% in March 2003. But since March, 1.8 million sf of new developments have been finished in the city of which almost 1.3 million sf is still available to let.
Drivers Jonas anticipates the city has further to fall in terms of rents and rent free periods. But this should bottom out by mid 2004with tenant demand returning in late 2004 and rent free periods starting to shrink in 2005.
Matthew Elliott, head of Central London Agency and partner at Drivers Jonas, says: "Poor demand for offices in London has coincided with a wave of new buildings coming on line--for developers this is not a recipe for success.But there are signs of life in the office market with more businessesthinking about taking space."
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