Could the Eurozone Crisis Stall Commitment to a London Office Lease?
Fears are growing that proposed London office lease developments could be put on hold as a result of economic uncertainty in the Eurozone. Experts warn the Eurozone crisis could affect tenant demand and access to funding.
The progress of planned London office space could be halted as concerns over the Eurozone crisis continue to mount – that’s the message from a number of industry insiders this week.
Richard Taylor from EC Harris believes economic uncertainty in the Eurozone means some developers could struggle to secure pre-let tenants in a new London office lease and external funding for their proposed projects could suffer. It’s feared these factors may in turn lead some developers to abandon their proposed London office space schemes altogether.
A new report from EC Harris shows that the pipeline for planned London office lease developments contains around 150 proposed projects which aim to bring around 53 million sq ft of office space to the capital by 2016. Of these projects, around 60% of the new commercial property is destined for the City which is currently experiencing a shortage of high quality London office lease options.
Mr Taylor warns that because of the economical crisis, many tenants are getting anxious about pre-lets, choosing to stay where they are or rent refurbished space rather than committing to brand new office space.
“What the crisis has done is put doubt in people’s minds. Tenants are getting nervous – from media to solicitors – about pre-lets,” he said.
The warning seems to echo recent market behaviour. Just last month RBS chose to downscale its investment bank by cutting 3500 jobs (the equivalent of 500,000 sq ft of office space) and law firm CMS Cameron McKenna backed out of a partial London office lease at Principle Place in the City.
Head of research at EC Harris Simon Rawlinson believes the success of future office schemes in London will largely depend on timing. While Land Securities and British Land have cleverly ensured their new skyscrapers, the Walkie Talkie Tower and the Cheesegrater, will be completed in 2014 when many City leases are due to expire, many fear the recently completed Heron Tower could struggle to attract tenants due to a lack of market demand.